Reiterate 'Buy' on TCS with revised target: Prabhudas Lilladher

MUMBAI: Prabhudas Lilladher has reiterated ‘ Buy’ rating on Tata Consultancy Services and revised its target price upward after the IT major announced robust second quarter earnings.

“TCS reported strongest revenue growth QoQ since Q2FY05, beating expectation comprehensively. Double digit growth cut across the line item.

TCS reported strongest quarter since Q2FY05. Revenue grew by 13% QoQ to Rs 92.9bn (PLe: Rs87.2bn Cons: Rs88.4bn) and 11.7% (PLe: 5%) in US$ terms. Operating margins improved by 86bp (PLe: -40bp), whereas EPS grew by 14.2% QoQ to Rs10.76 (PLe: Rs10).

We expect the volume growth to be in high single digit with touch positive bias in pricing for TCS. We expect them to maintain EBITDA margin in narrow range despite currency headwinds. We reiterate “BUY” rating with a revised target price of Rs 1,160, 14x FY12e earnings estimate,” the report said.