Money Magnet stock? TCS shares to give 20 pct return in 3 months, say experts

TCS Stock: At a time when the market is range-bound trading in 11,600 to 11,750 levels, market experts are highly bullish about the IT counters especially about Tata Consultancy Services or TCS as the fundamentals of the counter suggests an upside potential and the large-cap IT counter may show Rs 2,410 per stock levels in mid-term perspective i.e. two to three months period. Currently, the stock is around Rs 2,110 levels and it is expected to witness some profit booking until it reaches Rs 2,000 per scrip levels. market experts have advised investors to buy the TCS share on dips at around Rs 2000 to Rs 2,015 levels so that they could muster a gain of around 20 per cent in the TCS counter.

According to the detailed research by Apurva Prasad and Amit Chandra, HDFC Securities, "TCS’ growth and scale leadership in digital ($6.7bn annualized) are key differentiators. Continuity in strong deal wins, broad-based growth across verticals (especially core) and geographies are driving double-digit growth. Margin/attrition  differential against peers reflects superior execution." The research further adds that the TCS' revenue growth was 2.4/12.7 per cent  QoQ/YoY against Infosys' 2.1/11.7 per cent (TCS/INFY grew 11.4/9.0 per cent YoY CC in FY19). Digital revenues (31 per cent) grew 46 per cent  YoY  in 4Q (50 per cent YoY in FY19). TCS’ acceleration in BFSI (against deceleration in INFY) and digital growth outperformance continues. 

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"Headcount increased to 424,285 with attrition in control at 11.3 per cent. Net headcount additions stood at 6,356 in 4Q and 29,287 in FY19. Highest-ever deal wins with TCV at $6.2bn ($21.9bn in FY19). Book-to-bill has been over 1.1 for two quarters," says HDFC Securities research on TCS. The research says that strong deal bookings in the trailing two quarters and strong seasonality are expected to drive performance of the TCS.

On its suggestion to the market investors in regard to the TCS counter, Apurva Prasad and Amit Chandra of HDFC Securities says, "The fundamentals of the counter suggests an upside potential for around 20 per cent and the TCS stock may show Rs 2,410 per stock in mid-term perspective i.e. in around two to three months.

However, Niharika Ojha, Research Analyst at Narnolia Financial Advisors said that the counter would first show some correction and may show the Rs 1,994 per stock levels citing, "On margin front, despite a lot of challenges related to supply constraint and elevated subcontracting cost, TCS has managed to sustain its FY19 margins mainly on back of lower attrition and benefit from INR depreciation. However going forward we expect
some dent on margins due to onsite challenges, elevated subcontracting cost and
absence of currency benefit." 

Therefore, an investor is advised to first wait for some correction in the counter as the TCS stock is currently oscillating around Rs 2,113 per stock levels and a buy around Rs 2,000 to 2,015 levels would be more beneficial for the investors.