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Reduce TCS, target of Rs 375: IIFL

Posted on: June 27th, 2009 and is filed under Brokerage Recommendations.

IIFL has maintained its reduce rating on Tata Consultancy Services with a target price of Rs 375 in its June 25, 2009 research report.

“Tata Consultancy Services TCS’s management has been vocal in highlighting a return to sequential growth (US$ revenues) by as early as 2QFY10. With project renewals picking up, the pace of business erosion at TCS as well as its peers is on the decline. Arresting the erosion and modest new order wins, however, would not be enough to assure a robust recovery by 2HFY10 (4%+QoQ).”

“As such, the wait for a stronger recovery is likely to stretch beyond FY10, when clients determine budgets for FY11. Also, for TCS, client specific issues led to an early revenue (US$) de-growth (in 1QFY09) and could be a mathematical overhang on its FY10 revenue growth. For FY10, management indicated higher tax rates at 18% vs 15% earlier. As a result, we are adjusting our FY10 eps by -3.5%. Also, we are revising our target price and valuing the company at 15x FY11 PER. Maintain ‘Reduce’, target of Rs 375,” says IIFL’s research report.

source: Moneycontrol

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