Monday, 17 November 2008

Buy TCS, target of Rs 650: Anand Rathi

Anand Rathi Securities has recommended a buy rating on Tata Consultancy Services, TCS with a target price of Rs 650 in its November 17, 2008 research report. "TCS added 51 clients (gross) in 2QFY09, taking total active clients to 920. 1H09 saw TCS close 16 deals vis-à-vis 14 deals in 1H08. It is currently in pursuit of 20 deals. Its share of revenue from fixed-price projects is the highest of its peers (43.9% of TTM revenue). Efficient execution of these projects, along with decreasing share of domestic business, augurs well for TCS’ profitability. TCS trades at 8.8x FY09 and 9.9x FY10 estimated earnings."

"We rate it a Buy with a target price of Rs 650 at a target PE multiple of 10x its one-year forward earnings. At our target price, it would trade at 7.4x EV/EBITDA our one-year forward estimates. Our DCF valuations for TCS assume an 8.5% risk-free rate, a 6% risk premium and a 3% terminal growth rate. The DCF-based fair value, after taking estimated growth till FY10 and 10% growth during FY10-15, is Rs 645," says Anand Rathi's research report.

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Source: Moneycontrol

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