TCS (TCS IN, INR 1,250, maintain Buy)
Tata Consultancy Services' (TCS) Q4FY07 results were in line with our expectations. Revenues came in at INR 51.5 bn, up 5.9% Q-o-Q, and net profit was at INR 11.7 bn, up 6.2% Q-o-Q. On Y-o-Y basis, revenue and net profit growth stood at 37.9% and 44.9%, respectively.
TCS closed FY07 with revenues of USD 4.3 bn and net income of USD 950 mn, a growth of 41% and 43%, respectively, in USD terms. The company crossed the USD 2 bn and USD 1 bn revenue mark from North America and Europe, respectively, attesting to its scale and geographic spread. TCS' existing realizations have room for expansion.
Recent services such as business intelligence, remote infrastructure management, BPO, and assurance services are seeing strong traction. We expect these services to continue to lead healthy growth in FY08E. We believe that TCS has sufficient levers to sustain margins in FY08E given the continuing trend towards offshore and improving realizations on account of pricing and productivity gains.
Our EPS forecasts of INR 55.4 in FY08 and INR 69.7 in FY09 imply an EPS CAGR of 28.4% over 2007-09. At the CMP of INR 1,250 the stock trades at a P/E of 22.6x and 17.9x for our FY08E and FY09E earnings respectively. We reiterate our 'BUY' recommendation on the stock.
Edelweiss - TCS - big, and looking even bigger; result update Q4FY07; maintain Buy