Tata Consultancy Services
TCS reported a solid third quarter fiscal 2015 result.
Overall, growth and earnings were in line with our expectations and the firm sees an encouraging pipeline of business.
More than ever, TCS is seeing clients move toward social, mobile, analytics, and cloud technologies. The firm is increasingly investing in platforms, digital capabilities, and automation to meet these demands and we think they hold a long-term growth opportunity for the company. We continue to like TCS's position in the IT services industry and think the firm will remain India’s number one provider for the foreseeable future.
For the quarter, revenue rose 2.9% (2.5% in constant currency) to Rs 245 billion, quarter over quarter. On a year-over-year basis, revenue increased 15.1%. The firm saw positive revenue momentum across all geographic regions.
From an industry perspective, TCS expects energy to be weak--not terribly surprising, in our view, given the recent collapse in global oil prices and resulting near-term instability certain countries such as Venezuela and Russia.
However, management believes retail will bounce back post-Christmas trading and sees a strong order book across banking and financial services, manufacturing, high tech, telecom, and media.
We expect TCS to further extend its reach into digital transformation work as clients increasingly adapt to a SMAC-enabled world. We think TCS's early investment in a Silicon Valley Customer Collaboration Center and its digital enterprise offerings should help meet these needs and should bolster the firm's competitive positioning over the long-term.
Moat: Narrow
Stewardship: Standard
Fair value: Rs 2,540
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