Sharekhan maintains a buy rating for TCS with a revised price target of Rs 3590. For TCS, the third quarter of fiscal year 21 was the second quarter in a row with a strong all-round performance, led by a strong demand environment, market share gains and a rapid turnover conversion from deals won earlier. The company posted better-than-expected revenue growth of 4.1% quarter over quarter in constant currency (CC) in a seasonally weak quarter that was the strongest in the December quarter of the past nine years. On an annual basis, the company returned to a positive growth path with CC growth of 0.4%.

Despite the wage revision (-160 basis points), compared to our estimates, the EBIT margins improved by 42 basis points compared to the previous quarter to 26. 6%. This was supported by strong sales growth, operational efficiency through an operational model for Safe Boundary Workspaces (SBWS) and currency tailwind. Net income was Rs. 8,701 crore (up 3.2% qoq / 7.2% yoy), exceeding our estimates, led by strong sales growth and higher than expected margin expansion. In addition, the company reported the strongest cash conversion and best deal profits in the BFSI industry (even excluding the Postbank Systems deal, closed on Jan. 1, 2021), the highest quarterly net employee growth (including 1,500 Pramerica Systems employees). and all-time low rate of wear and tear during the quarter.

The TCVs for the deal profit increased 11.5% from the previous quarter (excluding the Phoenix Deal TCV from the second quarter of fiscal 2021) and increased year over year by 13 .3%, which offers strong sales visibility for the future. TCS management stated that cloud transformation is a multi-year opportunity.

1) Low cloud penetration at banks
2) significant investments in asset management products
3) Introducing the cloud to insurance customers.

In addition, management stated that the growth of the sector would be driven by investments in the following areas:

(1) Growth and transformation in which companies develop new business models Introduce and redefine the customer experience
(2) Increase efficiency and increase productivity. Given its end-to-end capabilities, deep expertise, contextual knowledge, and excellent product and platform offerings
Sharekhan believes that TCS is well positioned from a competitive standpoint. The management is therefore still confident that the company will return to double-digit growth in the 2010 financial year.

1) Despite the wage revision, the EBIT margins improved far beyond the expectations of the street
2) TCVs in the BFSI industry were valued at $ 2.6 billion, the strongest value in its history
3) Cash conversion remained strong with an FCF / EBITDA of 92%

An appreciation of the rupees and / or adverse movements between the currencies and / or a restriction of the local talent supply in the USA as well as a strict visa regime would affect the Affect the result.

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