Mumbai According to a report by Motilal Oswal, Tata Consultancy Services Limited (TCS) is one of the best-positioned companies to benefit from the increase in structural spending in the tech budget, which has upgraded the stock to ‘buy’ rating.
COVID-19 has structurally accelerated the growth profile of the IT services industry as corporates embark on a multi-year, cloud-based technology upgrade cycle.
“We expect TCS to benefit from continued growth given its strong organic capabilities, diverse vertical and geographic presence, deal-win momentum and strong workforce,” the brokerage firm said.
Given the supply-side challenges in the industry, TCS has been an industry leader in managing these challenges across multiple business cycles. Motilal Oswal said, “We see this as an important factor for TCS to be able to post sustainable growth.
The report said that while TCS has given good returns in the last year (30% in line with Nifty), it has outperformed its Tier-I peers (by an average of 30%) as well as its Tier-II IT. has performed. Services Peer (20% valuation discount for the first time in history). Motilal Oswal said, “We expect this underperformance to reverse as the base effect as well as peer growth starts to normalize to increase the market share of TCS.”
The brokerage firm expects TCS to benefit from demand tailwinds and provide 14% revenue CAGR in FY 2011-24, which is about 650 basis points higher than FY20-20. “Growth could further improve as offshoring from captive monetization and greater acceptance of inorganic opportunities could lead to increased market share,” it said.
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