In the trading session of Thursday, the shares of a global leader in IT services, consulting and business solutions surged 5.5 percent to hit an intraday high at Rs. 4,564 on BSE, as against its previous closing price of Rs. 4,551.7, having a market capitalisation of Rs. 16.2 lakh crores.
Brokerage Target
International brokerage firm Macquarie has set a record-high target price for Tata Consultancy Services Limited (TCS) and added the IT giant to its ‘Marquee idea list,’ driven by strong confidence in the company’s AI prospects.
Macquarie maintained its ‘outperform’ recommendation on the stock and raised its target price from Rs. 4,750 to Rs. 5,740, representing a potential upside of nearly 28 percent from its current trading price of Rs. 4,498.45.
Macquarie’s target is the highest on record for TCS, with no other brokerage setting a price target above Rs. 5,000-mark. The second-highest target for TCS was set by Nuvama at Rs. 4,800.
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Brokerage Outlook
Macquarie recently attended a briefing by Tata Consultancy Services (TCS) showcasing its investments in Artificial Intelligence (AI). The company also demonstrated an AI-based Autonomous Vehicle Platform with an algorithm supporting over 50 features.
The brokerage was impressed by TCS’s overall AI demonstration, noting that despite the company spending only 1-1.2 percent of its overall revenue on R&D—amounting to over $300 million annually—the investment is still substantial.
Macquarie highlighted that TCS has created an AI-based legacy modernisation framework.
Further, the brokerage maintained its earnings estimates for TCS and expects a potential pickup in medium-term demand. This anticipated rise can make legacy modernisation possible, facilitated by AI enhancements that offer cost savings and lower risks.
Macquarie views TCS’s extensive service and geographic portfolio as mitigating risks and supporting continued growth.
The brokerage has revised its valuation of TCS to 35 times the projected price-to-earnings ratio for FY26, up from 29 times previously.
Key drivers for this valuation include anticipated sequential growth and double-digit year-on-year sales increase, which Macquarie considers as significant catalysts for TCS’s performance.
Financials:
The company experienced significant growth in its revenue from operations, showing a year-on-year rise of around 5.4 percent from Rs. 59,381 crores in Q1 FY23-24 to Rs. 62,613 crores in Q1 FY24-25.
Similarly, its net profit grew during the same period from Rs. 11,120 crores to Rs. 12,105 crores, indicating a rise of 8.8 percent YoY.
Shareholding Pattern:
As per the shareholding pattern of June 2024, the Promoters hold a 71.77 percent stake in the company, Foreign Institutional Investors (FII) hold a 12.36 percent stake, while Retail Investors and Domestic Institutional Investors (DII) hold a 4.82 percent and 11.06 percent stake in TCS, respectively.
Stock performance:
The stock has delivered positive returns of nearly 33 percent in one year as well as around 10.2 percent returns in the last six months. So far in 2024, the shares of TCS have given about 18.2 percent of positive returns.
About the company:
Tata Consultancy Services Limited provide IT services, consulting and business solutions, as well as offering a consulting-led,
cognitive-powered, integrated portfolio of business, technology and engineering services and solutions through its unique Location Independent Agile™ delivery model, recognised as a benchmark of excellence in software development.
Written by Shivani Singh
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