Visit http://indiaer.blogspot.com/ for complete details �� ��
TCS: Reinvigorated under CEO “Chandra”…
CEO N Chandrasekaran “Chandra” confident than ever before
TCS’ CEO N Chandrasekaran better known as “Chandra” sounds
confident than ever before. An old hand in TCS, Chandra has great sales
instincts and was the chief architect of creating multiple business units
focused on domains and markets. Ramadorai, the previous CEO retired at
an age of 65 years, hence we believe Chandra, at just 47 years of age, has
a long stint with TCS ahead of him
Relative out performance continues
TCS reported strong Q2FY11 numbers which beat our as well as
consensus estimates. Q2FY11 revenues grew 13% QoQ and 25% YoY to
Rs 9286 crore, while EBIT margins improved 86 bps QoQ. After almost
five quarters of relative out-performance compared to Infosys, we believe,
the P/E discount rationale would subside. Subsequently, we are
introducing FY13E EPS estimate of Rs 57
EBITDA margins transitioning towards segment leader
Infosys continues to be the best margin franchise among Tier I IT
vendors. However, Q2FY11 EBITDA margins for TCS improved 70bps
QoQ despite headwinds from promotion (166 bps) and a >100% variable
pay-out, as revenue productivity (95 bps), SG&A (54 bps) and F/X (103
bps) created margin tailwinds. However, margin improvement was
helped in part by lower rental cost & write-back of doubtful debts
provision
Valuation
We expect TCS to report broad based value growth and have modeled
US dollar revenue growth of 19% CAGR during FY10-FY13E period.
Consequently, we value the stock at 21x our FY13E EPS estimate of Rs 57
and upgrade TCS to BUY from ADD.
Technical Outlook
• Stock is in strong up trend and potentially in third wave of a larger
impulse. In Dow theory parlance, stock is making consistent
higher peaks and troughs on weekly charts indicating medium to
long term up trend
• Current rally (3rd wave) which started around Rs. 670 levels would
achieve price equality to 1st impulse around Rs. 1245 levels.
• MACD oscillator is trending up and is placed in positive territory
on weekly charts indicating strength
• Declines from current levels therefore offer an opportunity to go
long in TCS from long term perspective. Change of view would be
warranted only if stock close below 825 levels on weekly basis
No comments:
Post a Comment