Edelwiess rates TCS as ‘Sector Outperformer’
Edelweiss has maintained ‘Buy’ recommendation on Tata Consultancy Services after the company reported stellar second quarter results.
By ET Bureau |
MUMBAI: Edelweiss has maintained ‘Buy’ recommendation on Tata Consultancy Services after the company reported stellar second quarter results. It has also rated it as ‘Sector Outperformer’ on relative returns.
TCS reported quarterly revenues of $2 billion for the first time. Net profit rose 32% to Rs 2,169 crore for the July-September quarter, and operating margins improved to 28% — the best TCS has managed over the past few years.
“Tata Consultancy Services has fired on all cylinders simultaneously - handsome revenue and margin performance, volume growth of 11% Q-o-Q, eight large deal wins spread across sectors, highest ever organic gross/net employee addition of 19,293/10,717, sequential growth of 10% plus across verticals & most clients, and most importantly, EBITDA margin improvement by 70bps to 30% (historic high).
At CMP of Rs 986, the stock is trading at a P/E of 23.2x and 20.4x for FY11E and FY12E earnings, respectively. With consistent outperformance on revenues (Q-o-Q) and strong margins, we see TCS’ valuations improving further and possibly entering the premium zone to that of Infosys. We maintain ‘BUY’ on the stock and rate it ‘Sector Outperformer’ on relative returns,” the report said.
At 10:30 am, the stock was at Rs 1036.35, up Rs 50.15 or 5.09 per cent on the NSE. It touched a high of Rs 1041.40 and low of Rs 1022 in trade so far.
TCS reported quarterly revenues of $2 billion for the first time. Net profit rose 32% to Rs 2,169 crore for the July-September quarter, and operating margins improved to 28% — the best TCS has managed over the past few years.
“Tata Consultancy Services has fired on all cylinders simultaneously - handsome revenue and margin performance, volume growth of 11% Q-o-Q, eight large deal wins spread across sectors, highest ever organic gross/net employee addition of 19,293/10,717, sequential growth of 10% plus across verticals & most clients, and most importantly, EBITDA margin improvement by 70bps to 30% (historic high).
At CMP of Rs 986, the stock is trading at a P/E of 23.2x and 20.4x for FY11E and FY12E earnings, respectively. With consistent outperformance on revenues (Q-o-Q) and strong margins, we see TCS’ valuations improving further and possibly entering the premium zone to that of Infosys. We maintain ‘BUY’ on the stock and rate it ‘Sector Outperformer’ on relative returns,” the report said.
At 10:30 am, the stock was at Rs 1036.35, up Rs 50.15 or 5.09 per cent on the NSE. It touched a high of Rs 1041.40 and low of Rs 1022 in trade so far.
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