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MOSL: Morning India (12/October/18)-1. TCS (In-line; Macro not hostile just yet); 2. India Life Insurance; 3. Fuel or Engines - Economy

MOrning India (12/October/18): 1. TCS (In-line; Macro not hostile just yet); 2. India Life Insurance; 3. Fuel or Engines - Economy

 

Today’s top research idea

TCS: In-line; Macro not hostile just yet

• TCS managed to return to double-digit YoY CC revenue growth (+11.5% YoY; our estimate: +11.9%) after 10 quarters. EBIT margin expanded 150bp QoQ to touch an 11-quarter high of 26.5%, back into its targeted band of 26-28% (our estimate: +26.1%), thanks to currency benefit of 120bp. PAT grew 22.6% YoY to INR79b (our estimate: INR78b).
• TCS won deals with total contract value (TCV) of USD4.9b - the same as last quarter. It expects to grow in double-digits for the remainder of the year, the ask-rate for which is not demanding (0.3% CQGR in 2HFY19).
• While currency on one hand provides a boost to the earnings, the events globally may still likely offset the same by keeping the valuation multiple, and hence the upside, in check. We maintain our Neutral rating.

 Piping hot news

Govt hikes customs duty on more items to rein in current account deficit

• The government on Thursday increased customs duty on a host of items, including telecommunication equipment, to 20% from the existing 10%, in a bid to reduce India’s current account deficit. This is the second round of increase in custom duties as the government looks to cut down on non-essential imports in the face of a weakening rupee and massive outflows.