TCS posted a 0.7% sequential growth in USD revenues to US$5,250mn v/s
US$5,215mn in 2QFY2019. In rupee terms, revenues came in at `37,338cr V/s `36,854cr,
up 1.3% QoQ. In Constant Currency (CC) terms, the company posted a 1.8% QoQ
growth. On profitability front, EBIT margin showed a dip of ~90bps QoQ to 25.6%.
Consequently, PAT came in at 8,105cr v/s `7,901cr in 2QFY2019, up of 2.6% QoQ. We
recommend a neutral rating on the stock.

Outlook and valuation: Over FY2018-21E, we expect TCS to post revenue CAGR
of 9.5% & 13.1% in USD & INR terms respectively. The company highlighted that
it stands comfortable in sustaining the EBIT margin in the range of 26-28%. On
the EBIT and PAT fronts, we expect the company to post 13.4% and 11.7% CAGR
over FY2018-21E respectively. The stock is trading at 21.3x FY2020E EPS of
`88.7.Valuations already discount a robust medium growth & favorable
operating environment and valuations are higher than its P/E averages.
However, given the good cash yield we recommend a Neutral.

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