Mehabe score: 5 G Factor: 2 Piotski Score: 7 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 2 and Piotski score of 7.
Description
Tata Consultancy Services is the flagship company and a part of Tata group. It is an IT services, consulting and business solutions organization that has been partnering with many of the world’s largest businesses in their transformation journeys for over 50 years. TCS offers a consulting-led, cognitive powered, integrated portfolio of business, technology and engineering services and solutions.
Main Points
Revenue Breakup
Based on Industry classification, company operates in 5 key verticals i.e. Banking, finance services & insurance (BFSI) which accounts for 39% of revenues, followed by, retail & consumer business (17%), Communication, media & technology (16%), Manufacturing (11%) & other platforms which accounts for the rest 17% of revenues.Site:TCSMain Symbol:TCS
Stock trades at 3257.0, above its 50dma 3225.19. It also trades above its 200dma 2964.61. The stock remains bullish on techicals
The 52 week high is at 3399.65 and the 52week low is at 2125.10
Price Chart
P/E Chart
Sales and Margin
Strengths
– is almost debt free.
– has a good return on equity (ROE) track record: 3 Years ROE 37.41%
– has been maintaining a healthy dividend payout of 54.58%
Weakness
– Stock is trading at 13.94 times its book value
-The company has delivered a poor sales growth of 8.61% over past five years.
Competition
– The industry trades at a mean P/E of 31.2x. Mindtree trades at the industry’s max P/E of 37.41x. TCS trades at a P/E of 36.2x
– Industry’s mean G-Factor is 3.6 while the mean Piotski score is 8.0. TCS has a G-Factor of 2 and Piotski scoreof 7.
– Average 1 month return for industry is 2.0%. The max 1- month return was given by Infosys: a return of 10.44 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 45411.0 cr compared to Rs 38322.0 cr for period ended Jun 2020, a rise of 18.5%
Operating Profits reported at Rs 12663.0 cr for period ended Jun 2021 vis-vis 10024.0 for period ended Jun 2020 .
Operating Margins expanded 172.8 bps for period ended Jun 2021 vis-vis Jun 2020 .
The EPS for Jun 2021 was Rs 24.35 compared to Rs 25.0 for previous quarter ended Mar 2021 and Rs 18.68 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 171266.0 cr for period ended TTM vis-vis sales of Rs 164177.0 cr for the period ended Mar 2021, a growth of 4.1%. The 3 year sales cagr stood at 5.4%.
Operating margins expanded to 29.0% for period ended TTM vis-vis 28.0% for period ended Mar 2021, expansion of 100.0 bps.
Net Profit reported at Rs 34430.0 cr for period ended TTM vis-vis sales of Rs 32430.0 cr for the period ended Mar 2021, rising 5.8%.
Company recorded a Net Profit CAGR of 3.0% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 38802.0 cr for period ended Mar 2021 vis-vis Rs 32369.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 39.0% compared to 37.0% over the last 3 Years. – The stock has given a return of 47% on a 1 Year basis vis-vis a return of 20% over the last 3 Years. – The compounded sales growth on a TTM bassis is 5% vis-vis a compounded sales growth of 10% over the last 3 Years. – The compounded profit growth on a TTM basis is 3% vis-vis a compounded profit growth of 9% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Mar 2021 fii holding stood at 15.62% vis-vis 15.88% for Dec 2020 – Public shareholding has remained largely constant. The Mar 2021 public holding stood at 4.31% vis-vis 4.29% for Dec 2020
Conclusion
– is almost debt free.
– has a good return on equity (ROE) track record: 3 Years ROE 37.41%
– has been maintaining a healthy dividend payout of 54.58% – Stock is trading at 13.94 times its book value
-The company has delivered a poor sales growth of 8.61% over past five years.
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 3225.19 and is trading at 3257.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
