TCS Q4: Brokerages see double-digit return; is it time to buy the stock?

Analysts on Dalal Street have retained their bullish view on Tata Consultancy Services (TCS) after it posted a 7.35 per cent year-on-year (YoY) growth in consolidated net profit at Rs 9,926 crore for the quarter ended March 31, 2022. It had reported a profit of Rs 9,246 crore in the corresponding quarter last year. On the other hand, revenue from operations grew 16.57 per cent YoY to Rs 50,951 crore.

Shares of the IT major traded 0.78 per cent up at Rs 3,725.25 at around 11.15 am (IST) on Tuesday, while the benchmark BSE Sensex was down 490.96 points, or 0.83 per cent, at 58,473.61 at around the same time.

While maintaining a ‘Buy’ call on TCS, brokerage Motilal Oswal Financial Services has set a target price of Rs 4,240, indicating an upside of nearly 14 per cent from the current market price. Mitul Shah, head of research, Reliance Securities is also positive on TCS with a target price of Rs 4,400.

“We maintain our positive stance on TCS due to its strong growth outlook,” Motilal Oswal Financial Services said, adding the IT firm has consistently maintained its market leadership position and shown best-in-class execution. This renders the company with ample room to maintain its industry-leading margin and demonstrate superior return ratios.

Commenting on the financial results, Rajesh Gopinathan, chief executive officer and managing director, TCS said, “We are closing FY22 on a strong note, with mid-teen growth and adding the maximum incremental revenue ever. Increasing participation in our customers’ growth and transformation journeys, and an all-time high order book provide a strong and sustainable foundation for continued growth ahead.”

Meanwhile, the company also recommended a final dividend of Rs 22 per equity share. The same will be paid on the fourth day from the conclusion of the 27th annual general meeting. TCS also achieved the highest ever order book with a total contract value of $11.3 billion in Q4FY22 and $34.60 billion in FY22.

“TCS reported strong performance in Q4FY22 driven by strong growth across geographies and strong deal wins. TCS is likely to be one of the key beneficiaries of the medium-term uptrend in technology spending. We expect TCS to gain market share on the back of vendor consolidation and captive monetisation efforts. We remain positive on the stock given its strong revenue growth, elevated EBIT margin and industry-leading return ratios,” Shah of Reliance Securities said.

Another brokerage firm, Prabhudas Lilladher has set a target price of Rs 4,221 for TCS post Q4 results. 

“We remain structurally positive on TCS given its strong growth momentum on a high base, best in class supply-side metrics with industry-leading margin profile and strong client mining abilities,” the brokerage said.

Also read: TCS Q4: Dividend, attrition, net profit, analysts view; here are key takeaways

Also read: TCS Q4 results: Net profit rises 7% to Rs 9,926 cr, revenue up 16%, dividend declared