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Standing tall …
TCS reported strong revenue and earnings growth in Q4FY11 while
maintaining EBIT margins (we were modelling 85 bps QoQ decline).
The company exits FY11 with record volume growth of 29.7% and
EBIT margins of 27.8% and expects to maintain them in FY12.
Noticeably, the initial FY12E hiring guidance of 60,000 suggests a
strong demand pipeline and continued momentum from exiting
clients. This leads us to raise our FY12E and FY13E estimates sharply
as also our price target to | 1320 vs. | 1280 earlier.
Good beat in seasonally weak quarter
TCS reported 4.7% US$ and 5.1% rupee revenue growth in a
seasonally weak quarter led by 2.9% volume growth and beat our
estimates. Revenues grew 31.3% YoY to | 10,157 crore. At | 2,846
crore, EBIT was higher relative to our | 2,723 crore estimate on
higher EBIT margin of 28.02% vs. our 27.23% estimate. The
company earned | 12.3 in earnings led in part by higher other
income relative to our estimate.
Hiring suggests volume led revenue growth in FY12E
TCS hired 19,324 (consolidated, 17,512 in IT) heads in Q4FY11
including 8,569 laterals and 9,082 freshers while utilisation including
trainees declined 2 percentage points (pp) to 75.1% vs. 77.1% in
Q3FY11. That said, TCS hired 40,000 more heads than its initial
guidance of 30,000 (for FY11) gross addition given in April 2010 and
still managed to improve utilisation including trainees by 220 bps.
Finally, the initial FY12 hiring target of 60,000 suggests a strong
demand environment and volume led revenue growth in FY12E.
Valuation
We expect TCS to report US$ and rupee revenue growth of 20.9% CAGR
and 18.9% CAGR over FY10-FY13E period. Further, we expect earnings to
grow at 19.5% CAGR during the same period. Thus, we have valued TCS
at | 1,320 (| 1,280 earlier) i.e. at 22x FY13E EPS estimate of | 60 (| 58) and
maintained our BUY rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Standing tall …
TCS reported strong revenue and earnings growth in Q4FY11 while
maintaining EBIT margins (we were modelling 85 bps QoQ decline).
The company exits FY11 with record volume growth of 29.7% and
EBIT margins of 27.8% and expects to maintain them in FY12.
Noticeably, the initial FY12E hiring guidance of 60,000 suggests a
strong demand pipeline and continued momentum from exiting
clients. This leads us to raise our FY12E and FY13E estimates sharply
as also our price target to | 1320 vs. | 1280 earlier.
Good beat in seasonally weak quarter
TCS reported 4.7% US$ and 5.1% rupee revenue growth in a
seasonally weak quarter led by 2.9% volume growth and beat our
estimates. Revenues grew 31.3% YoY to | 10,157 crore. At | 2,846
crore, EBIT was higher relative to our | 2,723 crore estimate on
higher EBIT margin of 28.02% vs. our 27.23% estimate. The
company earned | 12.3 in earnings led in part by higher other
income relative to our estimate.
Hiring suggests volume led revenue growth in FY12E
TCS hired 19,324 (consolidated, 17,512 in IT) heads in Q4FY11
including 8,569 laterals and 9,082 freshers while utilisation including
trainees declined 2 percentage points (pp) to 75.1% vs. 77.1% in
Q3FY11. That said, TCS hired 40,000 more heads than its initial
guidance of 30,000 (for FY11) gross addition given in April 2010 and
still managed to improve utilisation including trainees by 220 bps.
Finally, the initial FY12 hiring target of 60,000 suggests a strong
demand environment and volume led revenue growth in FY12E.
Valuation
We expect TCS to report US$ and rupee revenue growth of 20.9% CAGR
and 18.9% CAGR over FY10-FY13E period. Further, we expect earnings to
grow at 19.5% CAGR during the same period. Thus, we have valued TCS
at | 1,320 (| 1,280 earlier) i.e. at 22x FY13E EPS estimate of | 60 (| 58) and
maintained our BUY rating.
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