TCS Q4 results 2018 impact: Share price spikes 5% to record high; CLSA says 'Buy', ups TP to whopping Rs 3,700

TCS Q4 results 2018 impact:  Tata Consultancy Services (TCS) share price surged over 5 per cent to record high on Friday after country's largest software exporter on Thursday reported a 4.4 per cent growth in its consolidated net profit at Rs 6,904 crore for the March 2018 quarter and its board recommended a 1:1 bonus share issue, along with Rs 29 per share dividend. 

The TCS share price rose as much as 5.2 per cent to Rs 3,357 on the BSE. Volumes doubled as over 3 lakh shares exchanged hands on the counter against two-week average of 1.5 lakh shares on the BSE. Global brokerage CLSA maintained Buy on the stock, hiking the target price to Rs 3700 from Rs 3250 earlier. This entails over 10 per cent upside on TCS from Friday's intraday high level. 

"The company's growth outlook is improving from large deal wins and digital share gains. We expect TCS to maintain payout ratios and expect a buyback and dividend. Margins were slightly below expectations despite a 40 bps forex tailwind, but overall, good growth in otherwise seasonably good quarter," said CLSA in a report.

Edelweiss Securities, however, doesn't see much upside on the stock as TCS has already risen over 40 per cent in the last one-year factoring in the positives.    

"With robust deal wins and green-shoots in BFSI, there is definite possibility of double-digit revenue growth. With growth acceleration, scale up in digital and support from currency, margins are ready for uptick as well, implying return of double-digit revenue/earnings growth after 3 years. Bonus share (1:1) and 80-100% FCF distribution is the icing on the cake," said the brokerage. "However, current valuations at 19.2 times FY20E EPS offers limited upside, but, we do not see downside to the stock despite high multiple due to sector tailwinds and high cash returns," Edelweiss noted. 

The brokerage maintained HOLD rating with a revised target price of Rs 3,321 from Rs 3,250 earlier at 20 times FY20E EPS. 

TCS Q4 results 2018 had indicated a net profit of Rs 6,608 crore in the March quarter of last fiscal year, the IT major said in a regulatory filing. For the entire 2017-18, TCS saw its net profit dipping 1.7 per cent to Rs 25,826 crore, while revenue rose 4.3 per cent to Rs 1.23 lakh crore. 

At the end of March 2018, TCS had 3,94,998 employees with attrition rate at 11 per cent in IT services.

Meanwhile, Infosys and Wipro were also trading strong with the Nifty IT index (up 3 per cent) being the sole gainer among NSE indices.