Brics PCG recommends a 'Buy' on TCS. The report states that, continuing with the trend set by Infosys, TCS has reported a strong Q1 FY07 performance.According to US GAAP figures, the company's revenues and netprofit grew by 11.3% and 8.4%, respectively. The higher net profit growth was aided by an other income component of Rs 66.8 crore and took place despite a fall in operating profit margins from 24.1% in Q4 FY06 to 22.4% in Q1 FY07.EBIDTA grew at a slower rate of 3.3% due to the 15% salary hike given during the quarter as well as the integration costs of Diligenta. The quarter witnessed a ramp up in revenues from large deals as well as better traction in the businesses of its recent acquisitions.The report is revising its FY07 and FY08 revenue and EPS estimates upwards to account for recent deal announcements and the better-than-expected demand scenario.It has raised its EPS estimates for these two years by 1.3% and 5.4%, respectively.It expects TCS' margins to improve from Q1 FY07 levels. However, they will remain under pressure due to wage inflation and initial costs incurred during the ramping up of large deals.
