Analysts Raise Price Targets For TCS After Q3 Results

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Most analysts expect Tata Consultancy Services Ltd. to continue benefitting from mega deals and adoption of digital services as they raised price targets and earnings estimates for the nation’s largest software services exporter despite its premium valuations.

The optimism also stems from an improvement in the company’s margin during the quarter ended December despite wage hikes and its guidance for double-digit revenue growth in the next financial year.

TCS reported a 4.7% quarter-on-quarter rise in revenue at Rs 42,015 crore in the October-December period. Its profit rose 3.2% to Rs 8,701 crore. The company’s margin expanded 40 basis points sequentially to 26.6%. That, according to its Chief Financial Officer V Ramakrishnan, was a result of better utilisation and efficiency.

The company also won total deals worth $6.8 billion during the reported quarter.

The IT sector, analysts said, has entered into a technology upcycle, and TCS will benefit from the recent wave of business outsourcing.

Of the 47 analysts tracking TCS, 26 have a ‘buy’ rating, 13 suggest a ‘hold’ and the remaining eight recommend a ‘sell’.

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