Nirmal Bang Institutional Equities has upped its rating on Tata Consultancy Services Ltd (TCS) to 'Buy' and raised its target price on the Tata group stock after it hosted NBIE conference earlier this month. TCS, the brokerage said, believes that discretionary spending is likely to return in large US banking players post the Fed rate cuts as these players are looking at larger tech modernisation programs. UK and Europe banks are likely to see recovery over the next couple of quarters, Nirmal Bang suggested.
"The manufacturing vertical saw labour issues and supply chain issues in 2QFY25. The healthcare vertical is in wait and watch mode and it will take 2-3 quarters to get some clarity after the new US administration policy is formed. There were some client specific issues in Q2, which will stabilise in Q3 and growth should return in Q4," it said.
TCS shares are up 6.5 per cent in 2024 so far. The IT major commands a market capitalisation of Rs 14,75,185 crore and is the second most-valued stock on Dalal Street. At Rs 16,55,280 crore, Reliance Industries Ltd is the most-valued stock.
Nirmal Bang said TCS has been an early investor in Gen AI technology by partnering with hyperscalers, important ecosystem players and training employees in the latest skills.
Gen AI is seeing a lot of use in Banking, Retail, Life sciences and manufacturing. It is also creating AI offices and roadmaps for clients. It said overall furloughs are expected to be similar to that of last year. "While it believes that it is still early to comment on green shoots due to the Trump win, it is Positive on Trump as he is more business friendly and we expect him to try to reduce the geopolitical uncertainty, which should in turn resolve many industry challenges and IT Services spend may improve from these verticals," it said.
Nirmal Bang said TCS can deliver sustainable earnings growth, the best margins, strong ROICs and healthy cash flows in the tier-1 space. It sees FY25-FY27 revenue, EBIT, EPS CAGR at 9 per cent, 14 per cent and 13 per cent.
It upgraded TCS to a 'Buy' from 'Hold' and valued it at 29.3 times estimated September 2026 EPS for a slightly higher target price of Rs 4,964 against an earlier target price of Rs 4,932 as it rolled forward to September 2026 EPS post the 2QFY25 results.