Tata Consultancy Services - Good, but in the price :Standard Chartered Research,

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 7%+ volume growth beats expectations. But the 233bp
EBITDA margin drop was sharper versus ours (-205bp)
and consensus’ (-180bp) estimates.
 Robust deal wins could keep the volume momentum on,
however, we believe that is built in 15%/16% upgrade to
consensus FY12/13F EPS over the past 9 months.
 Further upside may be limited as pricing growth remains
weak (-50bp qoq); cross-currency headwinds + campus
wage-hike cycle in FY13 restrict headroom for mid/long
range margin management, in our view.
 Stay IN-LINE with Rs1,280 price target.
1Q12 results: Mixed bag. Cons. revenues grew 7.5% qoq
to US$2.41bn, versus our US$2.39bn estimates, all volume
based (+7.4%), as cross-currency (+1.2%) was neutralized
by realization decline (-50bp) and offshore shift (-80bp).
EBITDA margin dropped 233bp qoq, higher than estimates,
as SG&A expenses picked-up (+83bp). PAT at Rs23.8bn,
flat qoq, was 5% above our estimates, but mainly due to
higher FX gains (+Rs796mn versus –Rs28mn est).
FY12 outlook – Volume centricity to remain.  We expect
TCS to sustain the industry leading volume growth as deal
momentum remain strong – 10 large deal wins in 1Q add to
the 24 wins over the last 3 quarters + hiring outlook remains
robust (17,000-20,000 guided gross addition in 2Q).
But an FY12 encore to FY11 margin beat may be tough.
Utilisation has limited headroom at 82%+, ex-trainees (TCS’
target band is 82-84%). The targeted 50/50 lateral/fresher
mix ( 56/44 in FY11) should keep the trainee bench higher.
Realization growth remains weak – 122bp over the last 4
quarters is slower relative to Infosys’ 7.2% (est). We believe
a sharper pick-up will be critical to manage margin in an
adverse currency scenario. Our estimates bake 140bp drop
in EBITDA margin in FY12 and further 123bp fall in FY13
from a likely campus wage hike cycle (against consensus’s
estimate of 74bp decline over FY11-13).
Maintain In-LINE. We raise our FY12F EPS by 2.5% to
build in 1Q actuals + improved yields. However, our FY13F
EPS is down by 1.0%, factoring potential campus wage
hikes impact. Our P/E based PT is unchanged at Rs1,280
(21x FY13E EPS) and implies 8% valuation premium versus
Infosys. Sustained qoq volume momentum + weak nearterm outlook on peers delivery are positives but stock’s rich
valuation (60% premium to Sensex on FY12F EPS) and
demand concerns from global macro environment could
restrict the upside