TCS, in its quarterly analyst briefing, highlighted that in 3Q FY14 seasonal weakness will affect revenue growth in key markets, sequential revenue growth could moderate to less than 3%. The report also said the Ebit margin will be stable at Q2 FY14 levels of approximately 30% and net income will receive a boost from forex gains.
We believe TCS can sustain the gap in revenue growth and margins versus the industry, and therefore we retain ‘add’ on the scrip.
We expect TCS to outperform industry on revenue growth due to its superior market reach and do so profitably given its best-in-class execution capabilities.
We believe TCS’ premium multiples are deserved given consistency in performance and leadership in growth/profitability.
Kotak Institutional Equities