IDFC maintains ‘outperform’ rating on TCS with target price of Rs 2,700

IDFC maintains ‘outperform’ rating on TCS with target price of Rs 2,700

Despite TCS' weak revenue growth outlook, IDFC maintained it's 'outperform' rating on the company's stock with a twelve-month target price of Rs 2,700 a share.

IDFC said in a note to investors that it believed that TCS was on track to enjoy industry leading dollar revenue growth in the fiscal year 2015 as well.

It said that improving discretionary spending on IT services in the United States and in Europe would drive healthy growth for the Indian IT companies. In the note, it added that it estimates suggested increase in TCS' valuations in case the global economy gathers momentum.

Maintaining its rating for TCS stock at 'outperform,' it said, "The management has reiterated its optimistic view on the demand environment. Despite seasonal softness in Q4FY14 vis-a-vis Q3, it expects FY14 to be better than FY13 and FY15 better than FY14."

According to IDFC's estimates, US/UK revenue growth would be close to TCS's average, while growth in Europe would be in line with previous quarters, i. e. 6.5 per cent in third quarter of FY2014). Latin America is expected to strong, while West Asia/APAC will likely remain flattish.

TCS, the biggest IT outsourcer in India, on Tuesday issued a revenue warning, stating that it expected its revenue to slip quarter-on-quarter in the three months ending March 31, 2014. The weak outlook dragged TCS shares under selling pressure. In morning session on Wednesday, the stock shed nearly 5 per cent to around Rs 2020 a share.

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