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TCS 1QFY2015 performance highlights and results update

July 21, 2014, Monday, 11:20 GMT | 07:20 EST | 15:50 IST | 18:20 SGT
Contributed by Angel Broking


TCS’ 1QFY2015 results have come in better than expected, both on the revenue and net profit front, while the EBIT margin has come in lower. The USD sales growth for the quarter came in at 5.5% qoq to US$3,694mn V/s an expected US$3,671mn, which was mostly volume lead (5.7% qoq). In rupee terms, the revenue came in at Rs.22,111cr (V/s an expected Rs.21,944cr), up 2.6% qoq. The EBIT margin came in at 26.3% (V/s an expected 27.1%), declining by 285bp qoq. Other income came in higher by 16.6% qoq while the tax expense dipped by 6.1% qoq during the quarter. The PAT for the quarter came in at Rs.5,058cr (V/s an expected Rs.4,807cr), dipping by 4.5% qoq. We maintain our Buy rating on the stock with a target price of Rs.2,760.

Quarterly highlights: The USD sales growth for the quarter came in at 5.5% qoq to US$3,694mn, mostly volume lead (5.7% qoq). In rupee terms, revenues came in at Rs.22,111cr (V/s an expected Rs.21,944cr), up 2.6% qoq. The EBIT margin came in at 26.3% (V/s an expected 27.1%), declining by 285bp qoq. Other income grew 16.6% qoq and the tax expense dipped by 6.1% qoq during the quarter. The PAT came in at Rs.5,058cr (V/s an expected Rs.4,807.3cr), dipping by 4.5% qoq.

Outlook and valuation: The Management reiterated that it expects FY2015 to be better than FY2014 on the back of strong deal pipeline and budget indications from clients. Over FY2014-16E, we expect TCS’ revenue to post a CAGR of 14.6% in USD terms and of 14.4% in INR terms. We maintain our Buy rating on the stock with a target price of Rs.2,760.