Switch to TCS from L&T on valuations: Credit Suisse

Says TCS scores on fundamentals, earnings-per-share growth and cash generation

Investors should switch to Tata Consultancy Services Ltd (TCS) from Larsen & Toubro Ltd (L&T) as valuations and fundamentals now favour the software services exporter over the engineering firm, Credit Suisse said in a note on Friday.

TCS shares surged 73% last year, compared with a flat performance by L&T. But roles have reversed this year, with the construction firm up 21% and the IT firm down 3.1%.

Credit Suisse estimates L&T is now trading at a 14% price-to-earnings premium to TCS, the highest since October 2010, even as consensus earnings estimate changes have been "insignificant."

The investment bank added that TCS also scores well on fundamentals such as leverage, earnings-per-share growth and cash generation.