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Tata Consultancy Services Ltd. – Q1FY12 Result Update
High Utilization Levels, Strong Volume Growth drive Q1 Performance
Tata Consultancy Services Ltd. (TCS) has once again delivered a stellar performance for the first quarter. High utilization levels and better than expected volume growth have balanced the negative effect of wage hikes and employee additions on net profit margins.
Outlook & Valuation
Strong volume growth and management commentary indicating continued confidence in offshore IT service demand in an uncertain economic environment strengthens our confidence in this stock. Good double digit growth in service verticals like BFSI, Telecom, etc. as well as expansion in emerging markets could improve bottom-line margins going forward. At the current market price, the stock is trading at 21.36x its FY12 earnings estimate. We reiterate our accumulate rating on this stock for a price target of INR 1,280, implying an upside of 14% from current levels.
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