Brokerages upgrade TCS, raise target by up to 34%

MUMBAI: Brokerages have raised target prices on Tata Consultancy Services by up to 34.7 per cent after the IT major reported better-than-expected earnings for the quarter ended June. Some analysts have even upgraded the stock, but overall, ratings on the stock were mixed.

The IT major posted ?7,340 crore consolidated net profit for the first quarter of fiscal 2018-19, registering 23.5 per cent year-on-year and 6.3 per cent sequential growth. “Backed by large deal wins and bottoming out of US BFS, TCS’ growth outlook is improving. We expect it to post the strongest organic growth in the tier1 pack,” said Macquarie, upgrading TCS to ‘outperform.’ Jefferies, which upgraded TCS shares to ‘buy’, saying that TCS’ valuation premium to peers is justified by better growth visibility or outlook as it is the only Tier-1 IT company in its coverage with double-digit growth over FY19-FY21.

However, Kotak Institutional Equities has maintained its bearish view citing expensive valuation.

Edelweiss had similar views on TCS’ valuation. The brokerage said it believes that the company’s superior market positioning and improved demand outlook is priced in the valuation.

“Players with relatively cheaper valuations are a better play on the generic demand recovery indicated by TCS results/commentary,” said Edelweiss which retained ‘hold’ rating on the stock.

TCS shares rallied 5.59 per cent to end at record closing high of ?1,979.90.