Motilal Oswal Recommends This IT Stock To Buy With A Target Price Of Rs. 4220

Analysts are expecting the IT services companies to experience an acceleration in structural growth over the medium term, as corporates embark on a multi-year cloud-led upgrade cycle. Renowned brokerage firm Motilal Oswal thinks, "This shift in the business model should lead to a substantial increase (5% revenue v/s 3% historically) in the tech budgets of enterprise clients, adding 5-6% incremental growth for the industry." The firm has recommended investors to buy stocks of TCS with a potential upside of 17%, within a target period of 1 year.

Target Price

The Current Market Price (CMP) of TCS is Rs. 3604. The brokerage firm, Motilal Oswal Recommends has estimated a Target Price for the stock at Rs. 4220. Hence the stock is expected to give a 17% return, in a Target Period of 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 3604
Target Price	Rs. 4220
1 Year returns	17.00%

Company performance

TCS's sales stood at Rs. 1642 b, in FY 21, and the brokerage firm is expecting it is to grow Rs. 1910 b in FY 22. In FY 21 sales grew at a 4.6% rate which is expected to grow at a 16.4% rate in FY22. Additionally, the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at Rs. 465 b, in FY 21, and the brokerage firm is expecting it to grow Rs. 542 b in FY 22.

Tata Consultancy Services (TCS) provides innovative, best-in-class consulting, IT solutions, and services to its clients. N. Chandrasekaran is TCS's present Chairman.

Comments by Motilal Oswal

Maintaining buy rating for TCS, Motilal Oswal said, "While IT services companies have ramped up hiring, we expect attrition to remain elevated in 2HFY22 and stabilize gradually in FY23E. Moreover, we see the current intensity of supply-side challenges as transient and expect normalization over the medium term. TCS is the industry bellwether in managing supply-side challenges."

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

(Also read: Buy This Stock With A Target Price Of Rs. 5700: Edelweiss Recommends)