Kotak revises TCS target downwards to Rs 1250

MUMBAI: Kotak Securities is of the view that the TCS management's commentary on 4QFY12 looks weak. The brokerage has revised its EPS estimates downwards and cut the target price to Rs 1250 from Rs 1300 while maintaining ‘Buy’ recommendation on the stock.

“TCS management made two important comments on demand viz (1) 1/3rd of 96 clients within top-120 have budgeted for spending cuts and (2) discretionary projects are undergoing greater scrutiny causing delays in award of projects.

TCS may decline after weak commentary and quality of growth. However, we see reasonable upside despite moderation in our revenue growth forecast. We revise our EPS estimates for FY2012-14E down by 1-2% on the back of modest revenue growth estimate cuts. We continue to value TCS at the mid-range of mid-cycle multiple and cut our target price to Rs 1250/share. BUY rating and conviction stay unchanged,” the brokerage said.