Tata Consultancy Services (TCS) is recommended to buy with an increased target price of Rs. 1120 over one year. The stock is currently traded at Rs.986 range.
The company has reported stellar performance for 2QFY11 with q-q USD revenue growth of 11.7% as against 6.4% growth in USD revenue in 1QFY11.
It is expected that the demand rebound would be sustained this year due to better IT spending by US corporate experiencing better cash flows, renewal of deals that were pending for a long time due to the economic slowdown
The company is expected to report excellent numbers for the coming quarters as well because of higher US corporate cash flows, which would likely to expand IT spending. Deal renewals are also picking up as against it was pending in the earlier days of economic slowdown.
Second quarter performance of the company is driven by double digit growth in all verticals and better volume growth.
Realisation is expected to improve in the coming quarters due to better product mix.
Better performance is also due to improved organizational structure of the company that gives more autonomy to business unit heads and incentives are accordingly aligned.
Revenue of the company is expected to grow at 6 -15% between FY11 -13 and EPS is expected to grow at 5 -13% during this period.
Considering better prospects of the company, the share is recommended to buy with a target price of Rs.1120 over one year.