What’s making ICICI Sec see a good upside for TCS in a target frame of 3 months?

Market


The brokerage firm ICICI Securities is bullish on the shares of Tata Consultancy Services (TCS) and has recommended to buy the stock in a price range of 3290.00-3335.00 and has maintained a target price of 3625. The research analysts of the broking firm have maintained a target frame of 3 months for the stock to hit its target price.

“The Nifty IT index in the last six weeks is seen forming a base above the recent 11 month’s declining channel breakout area signalling the end of the corrective phase. One of the heavyweights TCS has also recently generated a breakout above the falling channel containing the entire decline of CY22 and is seen consolidating above the same around the 52 week’s EMA. Post its quarterly numbers, it is seen resuming its up move, thus offering a fresh entry opportunity with favourable risk-reward set up,” said the research analysts of ICICI Securities.

“In the last six months, the stock is seen consolidating in the range of 3430-2950. We expect the share price to resolve above the upper band of last six month’s range of 3430, which will accelerate further upsides in coming months • We expect the stock to head towards 3625 in coming months as it is the 80% retracement of the April-September 2022 decline ( 3835-2926),” said the analysts.

They further stated in their research note that “TCS is one of the leading Indian IT services providing company having a presence in over 55 countries with a total employee strength of over 6 lakh. The company provides IT services, consulting & business solutions across various verticals like BFSI, Retail & CPG, Lifesciences & Healthcare, Manufacturing, Hi-Tech, etc. TCS’ revenue has grown at 12.9% CAGR in FY17-2022. We expect it grow at 11% from FY22-25E. We also expect the EBIT margin to improve by 110 bps to 25.3% by FY25E due to the tailwinds of improved utilisation, lower sub-contractor cost & lower attrition. Revenue growth is expected to be driven by strong TCV. TCS is aspiring to reach US$50 bn revenues by FY30 i.e. at 9% CAGR, to be aided by continued spending by global organisation on cloud transformation (multi year programs). It is also expected to be one of the key beneficiaries of vendor consolidation across clients.”

Tata Consultancy Services (TCS) has declared a third interim dividend of 8 and a special dividend of 67 per share taking the total dividend to 75 per equity share for fiscal FY23. The company’s equity shareholders whose names appear on the Register of Members of the Company or in the records of the Depositories as beneficial owners of the shares as of 17 January 2023—the record date established for this purpose—will receive the third interim dividend and the special dividend on 3 February 2023. TCS’ net profit for the third quarter of FY23 climbed by almost 11% to 10,846 crore from 9,806 crore the same quarter last year. The IT behemoth reported revenue of Rs. 58,229 crore, a growth of 19% YoY. The shares of TCS closed today on the NSE at 3,337.55 apiece, up by 0.27% from the previous close of 3,328.70. The stock recorded a total volume of 2,250,391 shares compared to the 20-Day average volume of 1,686,810 shares.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.


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