TCS rallies 3% to hit record high; outperforms with 11% jump so far in 2024

Shares of Tata Consultancy Services (TCS) jumped nearly 3 per cent on BSE to hit a record high of Rs 4,229.30 in Tuesday’s intra-day trade on a stable outlook. The stock of the Tata Group’s information technology (IT) company surpassed its previous high of Rs 4,184.75 reached on February 9, 2024.

Thus far in calendar year 2024, TCS has outperformed the market by surging 11 per cent. In comparison, the S&P BSE Sensex is up 2.3 per cent, while S&P BSE IT index is up nearly 5 per cent.

Given its size, order book and exposure to long-duration orders and portfolio, TCS is well positioned to withstand the weakening macro environment and ride on the anticipated industry growth, according to Motilal Oswal Financial Services.

Owing to its steadfast market leadership position and best-in-class execution, the company has been able to maintain its industry-leading margin and demonstrate superior return ratios, the brokerage said in December quarter result update.

It reiterated ‘buy’ rating on TCS with a target price of Rs 4,250 per share.

Meanwhile, last month, global brokerage UBS increased their FY25/26 earnings per share (EPS) estimates 3 per cent/9 per cent, upgrading TCS to 'Buy' from 'Neutral', and valuing the company at 28x PE (earlier 26x) on FY26E EPS.

"We see enough drivers to believe TCS can deliver industry-leading growth and margins among peers in FY25. These include: ramp-up of large deals such as BSNL, NEST, Aviva etc; revival in the BFSI segment; revival in cloud migration projects; and continued managed services demand strength at industry level," analysts at UBS said.

TCS expects operating model transformation including Gen AI, cloud, cyber resilience and digitalization, amongst others to be a key demand drivers. The company is leveraging the same to provide solutions to clients across various verticals such as fashion, banking, insurance and aerospace.

The company is launching Gen AI products around industry value chains, SDLC reimagination and responsible AI framework. TCS also seeks to offer differentiated products by integrating the technology across its products and platforms, analysts at KRChoksey Shares and Securities said.

However, CLSA reportedly said it sees more downside risk to its FY25 earnings estimates for IT companies, even as the stocks have posted a handsome rally in the last 11 months on hopes of a turaround in the coming fiscal led by US Fed rate cuts.