Tata Consultancy Services outperformed peers in revenue growth as it bagged large deals in the managed services space, said UBS Securities in its research report. The brokerage house said the company will “lead its peers in revenue growth by 100-150 basis points along with improvement in margins in FY25.”
The brokerage has given a “Buy” rating on the stock of TCS from “Neutral” earlier. It has also lifted the target price to Rs 4,700, an increase of 16% from the previous price target of Rs 4,050.
“We believe the market is not pricing this in, given a divided consensus and the stock remaining at the lower end of its long-term trading premium vs peers,” the report said.
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The report further said that there are a lot of factors in play to make TCS an industry leader in revenue growth and margins in the next financial year. These drivers include large deals ramp-up of BSNL, Nestle, Aviva, etc; revival in the BFSI segment and cloud migration projects; continued managed services demand strength at the industry level.
“On the margin front, we expect a sharp fall in attrition to aid in gross margins with some lag, a potential c200bp additional improvement in utilisation, and scope for subcontracting cost reductions. Our two-factor regression model suggests gross margin can expand by more than 100bp in the next four to six quarters,” said the research report.
