MOSL: TCS (Upgrade to Buy)-Structural levers intact; growth to support valuations
TCS: Structural levers intact; growth to support valuations; Upgrade to Buy
(TCS IN, Mkt Cap USD176.5b, CMP INR3604, TP INR4220, 17% Upside, Upgrade to Buy)
- IT services companies should see acceleration in structural growth over the medium term as corporates embark on a multi-year cloud-led upgrade cycle. This shift in the business model should lead to a substantial increase (5% revenue v/s 3% historically) in the tech budgets of enterprise clients, adding 5-6% incremental growth for the industry.
- Growth in the cloud would anchor this phase of technology spending, which would see a mid to high teen growth rate. Along with continued double-digit growth in digital services, this should more than compensate for the decline in traditional services.
- In our view, TCS is among the best positioned companies to benefit from this structural spending uptick, and hence are upgrading the stock to Buy rating.
- We expect TCS to benefit from the sustained growth given its 1) strong organic capabilities, 2) diverse vertical and geographic presence, 3) deal win momentum, and 4) strong headcount additions.
- With the industry seeing supply-side challenges, TCS has been the industry bellwether in managing these challenges over multiple business cycles. We see this as a key factor for TCS to be able to post sustainable growth.
Tata Consultancy Services provide consulting-led integrated portfolio of information technology (IT) and IT-enabled services delivered through a network of multiple locations around the globe. Co.'s full services portfolio consists of IT and Assurance Services, Business Intelligence and Performance Management, Business Process Services, Cloud Services, Connected Marketing Solutions, Consulting, Eco-sustainability Services, Engineering and Industrial Services, Enterprise Security and Risk Management, Enterprise Solutions, iON -Small and Medium Businesses, IT Infrastructure Services, Mobility Products and Services and Platform Solutions.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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