TCS can touch Rs 940: Seshadri Bharathan
TCS is up 6%. Most people have given a price target of Rs 950, but after the up moves that we have seen today, do you believe there could be a chance of a short-term correction after which you can buy or you would go ahead and buy at current levels? My call would not be for a week or 2 weeks. I would look at a longer period of time and let's understand what has happened in TCS on why this company has been outperforming - its operating margins have been very good. It is around 27%. Even if you look at the dip, it is around 40 basis points and the net profit margins around 22.5 basis points, a dip of 260 basis points mainly because of higher tax outgo of 19% vis-à-vis sequential quarter of around 14% last quarter. All said and done, even if you look at the overall macro environment and the business improving can be gazed by the number of hiring this year where they have increased it from 30,000 to 40,000 which gives a confidence that going forward, we might see a price appreciation in this stock and we might see a price of around Rs 940 which works out to around 21 times multiple of FY12 expected earnings of Rs 44.76. What is the expectation for other counters like HCL Technologies and the rest? Expectations are building up. If you look at the broader results this quarter, we have seen that there is clearly a very strong revenue growth around 5% to 6%. So, definitely that would be a positive. In terms of HCL Technologies, it will also be more to do with how the integration of various companies that they have bought and what kind of EPS accretive those companies might be and also it would be a play of valuation catch up for HCL Technologies. |
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