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CapitalVia Global
TCS (Buy)
CMP: ₹2,107.95
Target: ₹2,245
A steady start in the new financial year with the performance for Q1 FY20, TCS has aligned growth and durability with its key strengths. TCS in its recent results reported 10.8 per cent growth in consolidated net profit to ₹8,131 crore for the quarter April to June, corresponding to the previous financial year’s Q1 where consolidated net profit stood at ₹7,340 crore. Revenue of the company grew by 11.4 per cent to ₹38,172 crore on y-o-y basis compared to ₹34,261 previously. The digital revenue accounted for 32.2 per cent of the topline, growing 42.1 per cent in this quarter. The BFSI segment which is the largest vertical of the company outperformed and grew by 9.2 per cent y-o-y basis and the EBIT margin stood at 24.2 per cent. Q1 margin was impacted by increase in wages, ₹depreciation and increase in sub-contracting.
The EPS stood at ₹21.67, up by 13 per cent y-o-y The company had net employee addition of 12,356 which stood the highest in five years. The IT services bagged outsourcing contracts worth around $5.7 billion. Sustainability in growth, positive hiring trend, strong order book and deal wins are key drivers for steering demand.We recommend buy on TCS with target price of ₹2,245 representing a potential upside.
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