TCS Group Holding PLC: Diamond hands (stays SELL)
We tip our hat to those investors with diamond hands that have hung on to the stock through thick and thin. From our side, we struggle with the bank’s current market valuation. We believe today’s market valuation implies that TCS Group Holding (TCS) could consolidate the bulk of consumer banking profits outside the Top-5 banks in Russia in the medium-to-long-term. This is a tall order. As TCS grows and diversifies away from the very profitable credit card business, we believe the law of large numbers could affect its ROE more strongly. We are receptive to the comps angle and TCS is probably still cheaper vs. prominent fintechs that are yet to turn a profit. That said, we do not have a strong view as to how similar the comps are. The future cannot be known, but we believe the current market valuation does not put the odds on our side. We maintain our SELL rating on the stock, with a new price target (PT) of USD 72.1/share. TCS is trading at 23.5x P/E and 6.7x P/TBV on our 2022E numbers.TCS Group Holding is a retail banking services group based in the Russian Federation. Co. is principally engaged in providing retail banking services in the Russian Federation through its subsidiaries, primarily Tinkoff Credit Systems. Co., through this subsidiary, fully licensed by the Central Bank of Russia and a member of the Deposit Insurance System, specializes in credit cards. Co. provides online retail financial services through a branchless operating platform. Co. also offers remote access to its financial products and services through its online banking as well as through mobile banking and high-volume call centers.
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