Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Consultancy
Outlook
While near-term demand for the top-tier vendors is intact, uncertain global
macroeconomic outlook could weigh on the CY12E IT budgets of clients. This, in our
view, will only accelerate the need to cut costs and hence Indian IT services companies
should benefit from the increase in offshoring by clients. We expect TCS, India's largest
offshore services provider, to be the key beneficiary of clients’ increased focus on using
offshore delivery. For FY13, we forecast earnings to grow 18% in rupee EPS. We believe
our target P/E of 20x FY13E is fair given an earnings CAGR of 20% over FY12-14E. The
company has an estimated long-term earnings growth potential of at least 15%-20%
given a likely increase in focus on cost control and outsourcing in developed
economies. As such, we rate TCS Buy and name it our top pick.
Valuation
We value Indian IT services firms on a P/E basis relative to their historical trading range,
compared with peers as well as growth rates. We value TCS at a target P/E of 20x
FY13E to factor in its consistent outperformance over Infosys on revenues and profits.
Although our target P/E multiple is at a PEG of 1, we believe this adequately factors in
the downside potential from growing global macroeconomic concerns. On a one-year
forward basis, TCS currently trades at a 10% premium to Infosys and we believe this
will likely continue in the short term.
Risks
We identify three industry-level risks: a) a more-severe-than-anticipated global
slowdown, b) global vendor competition, c) aggressive steps taken by global vendors to
adopt the offshore model and d) increasing wage inflation with supply-side issues. For
TCS, the key company-specific downside risks remain relatively higher exposure to the
BFSI (Banking, Financial Services and Insurance) vertical and consequent compression
of its earnings multiple due to a greater impact of the financial market turmoil.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Consultancy
Outlook
While near-term demand for the top-tier vendors is intact, uncertain global
macroeconomic outlook could weigh on the CY12E IT budgets of clients. This, in our
view, will only accelerate the need to cut costs and hence Indian IT services companies
should benefit from the increase in offshoring by clients. We expect TCS, India's largest
offshore services provider, to be the key beneficiary of clients’ increased focus on using
offshore delivery. For FY13, we forecast earnings to grow 18% in rupee EPS. We believe
our target P/E of 20x FY13E is fair given an earnings CAGR of 20% over FY12-14E. The
company has an estimated long-term earnings growth potential of at least 15%-20%
given a likely increase in focus on cost control and outsourcing in developed
economies. As such, we rate TCS Buy and name it our top pick.
Valuation
We value Indian IT services firms on a P/E basis relative to their historical trading range,
compared with peers as well as growth rates. We value TCS at a target P/E of 20x
FY13E to factor in its consistent outperformance over Infosys on revenues and profits.
Although our target P/E multiple is at a PEG of 1, we believe this adequately factors in
the downside potential from growing global macroeconomic concerns. On a one-year
forward basis, TCS currently trades at a 10% premium to Infosys and we believe this
will likely continue in the short term.
Risks
We identify three industry-level risks: a) a more-severe-than-anticipated global
slowdown, b) global vendor competition, c) aggressive steps taken by global vendors to
adopt the offshore model and d) increasing wage inflation with supply-side issues. For
TCS, the key company-specific downside risks remain relatively higher exposure to the
BFSI (Banking, Financial Services and Insurance) vertical and consequent compression
of its earnings multiple due to a greater impact of the financial market turmoil.
No comments:
Post a Comment