TCS $100 bn market cap makes new history; outruns Sensex, Nifty and many others

A history was written anew on Dalal Street on Monday when IT-giant Tata Consultancy Services (TCS) clocked over $100 billion market cap. With this, TCS  entered in the elite club of top 100  highest valued companies in the world and also it is the first Indian company to enter this prestigious list after a decade. The performance of TCS is a special moment as the last Indian name which was written in the list was billionaire Mukesh Ambani’s Reliance Industries in 2008. 

After touching a 52-week high of Rs 3557 per piece on BSE, TCS finished at Rs 3415.20 on the index higher by 0.26%. Overall in the day, TCS rose by 4% earmarking a market cap of Rs 6,79,332.81 crore which would be $102 billion. 

Returns of TCS is even better than Sensex, Nifty 50 and other indexes!

With today’s new high, TCS has given overall 57.02% return to it’s investors in one year. Not even midcap or 200 stocks of BSE and Nifty have managed to give such returns. 

On the other hand, Sensex has given 23.98% return in a year, whereas S&P BSE 200 companies have just provided 22.08% return year-on-year (YoY) and S&P BSE 150 Midcap Index has grown by merely 15.41% on yearly basis. 

At the same time, Nifty 50 has managed to soar by 21.19% on yearly basis. Even Nifty 200 and Nifty Midcap 100 could not reached the levels of TCS, as both the index gave return by 21.04% and 21.94% on yearly basis to their investors. 
 
Guess what! TCS is way more valuable than you can imagine. 

The market capitalisation of TCS at Rs 6.8 lakh crore is just equal to market value of rest of all IT companies on Nifty IT index put together, yes you have guessed it right, even Infosys, HCL Tech and Tech Mahindra are included. 

TCS market value is now higher than that of its global peer Accenture whose market cap stood at $96.82 billion as of April 20, 2018.

Globally there are only 63 companies that are trading above the market value of over $100 billion. With today's record surge in market cap, TCS has now joined the elite league of 64 companies that are trading above the market value of over $100 billion. 

Not only this, TCS valuation is even higher than S&P BSE SmallCap select index which has a list of 59 companies under them. The index market cap is just at Rs 6,45,050.36 crore as on April 23. 

This is not it, TCS is even greater than four sectors namely of real estate, power, telecom and utilities of BSE index. 

As on April 23, S&P BSE Realty’s market cap stands at Rs 1,15,083.24 crore, while S&P BSE Power has market cap of Rs 5,29,989.65 crore, S&P BSE Utilities has market cap of Rs 5,81,593.97 crore and lastly S&P BSE Telecom having market cap of Rs 3,14,194.93 crore. 

No stopping TCS shares, more returns to come! 

If you thought this is it, there no further surprise in TCS share price, then you are wrong as analysts believe the valuation of the company will rise further. 

It needs to be pointed out TCS is currently trading at 19x FY20 P/E – highest in the IT Services space, and at significant premium to Infosys (15x) – despite the two reporting almost the results in FY18. It is currently trading at a premium of 29% versus Infosys. Therefore, TCS is the most expensive stock in IT sector. 

Vibhor Singhal and Shyamal Dhruve Research Analysts at Phillip Capital said, “While we believe part of the premium is justified by its management stability and superior growth expectations, we find the gap too large to sustain over medium to long term. We maintain our FY19/20 estimates (less than 1% change) and continue to value the stock at 18x P/E (highest in our coverage universe, premium to Infosys @ 17x).”

Sharekhan said, “We expect TCS to continue to trade at a premium to its peers. Hence, we upgrade our rating on the stock to Buy from Hold with a revised price target (PT) of Rs. 3,500.”

Analysts at Edelweiss Financial Services while maintaining hold on TCS said, “We do not see downside to the stock despite high multiple due to sector tailwinds and high cash returns.”

IDBI Capital said, “Our new target PER is at the top-end of the range of 15.3x-21x in the last three years as we are now more confident of TCS seeing the best improvement in revenue growth amongst IT large-caps.”

According to Antique Research report,  TCS has had good deal wins in 2HFY18. Company has been able to win large deals, although now the structure of such deals is different. Digital business and the products business is witnessing good traction and contributing to growth. New service organization and closely integrated consulting business is driving a sharper focus on digital, resulting in significant market share gains for the company. All these factors along with cross currency benefit will aid USD revenue growth. 

Govind Agrawal and Heli Modi of Antique said, “We increase revenue estimates and now factor in FY19E/20E USD revenue growth of 11.4%/10.5% respectively.”

Considering the above mentioned factors, TCS has a potential of touching Rs 3,700 per share, as per CLSA.  

AK Prabhakar, head of research at IDBI Capital expects the stock to hit Rs 4200-4500 in next two-three years, an upside of 20 per cent to 25 per cent. Jay Anand Thakkar, AVP - Equity Research, Anand Rathi Securities sees a target price of Rs 3700-3800 on TCS in next 12 months. 

Out of the 45 analysts covering TCS, 19 have a "buy" or higher rating, 18 a "hold", while the rest rate it "sell" or lower, reported Reuters.