Result Update

July 15, 2016

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

Tata Consultancy Services (TCS)

Buy
| 2700
12 months
10%

Management watchful on Brexit

Whats Changed?
Target
EPS FY17E
EPS FY18E
Rating

Changed from | 2,750 to | 2,700

Changed from | 130 to | 135.5
Changed from | 145 to | 149.6
Unchanged

Quarterly Performance
Revenue
EBIT
EBIT (%)
PAT

Q1FY17
29,305
7,347
25.1
6,317

Q1FY16
YoY (%)
25,668
14.2
6,748
8.9
26.3 -122 bps
5,709
10.7

Q4FY16
28,449
7,412
26.1
6,341

QoQ (%)
3.0
(0.9)
-94 bps
(0.4)

Key Financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)

FY15
94,648
27,294
21,696
110.8

FY16E
108,646
30,678
24,215
123.2

FY17E
121,606
33,928
26,701
135.5

FY18E
134,718
37,586
29,474
149.6

FY15
22.4
24.8
18.8
9.7
38.9
68.3

FY16E
20.2
22.3
17.2
7.5
37.2
79.0

FY17E
18.3
20.3
14.9
6.1
32.2
74.7

FY18E
16.6
18.4
13.5
5.0
29.7
75.7

*FY15 recurring PAT

Valuation summary
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)

Stock data
Particular
Market Capitalization (| Crore)
Total Debt (March-16) (| Crore)
Cash and equivalents (March-16) (| Crore)
EV (| Crore)
52 week H/L
Equity capital
Face value

Amount
482,691.9
196.0
29,517.5
453,370.4
2770 / 2119
195.9
|1

Price performance (%)

TCS
Infosys
Wipro
HCL Tech

| 2442

1M

3M

6M

12M

5.0
2.5
3.4
(0.5)

4.5
11.2
(0.4)
(1.7)

(4.3)
3.3
(7.1)
(15.3)

(2.8)
10.2
(10.6)
(10.8)

Research Analyst
Deepak Purswani CFA
[email protected]
Tushar Wavhal
[email protected]

ICICI Securities Ltd | Retail Equity Research

In Q1FY17, TCS reported better quarterly earnings as margins were

above our estimates. US$ revenues grew 3.7% QoQ to $4,362
million vs. our 3.6% growth, $4,358.5 million estimate
Constant currency revenues grew 3.1% QoQ led by volumes (3.4%
QoQ) partly offset by a drop in realisations (~30 bps)
At 25.1%, EBIT margins declined ~100 bps QoQ weighed by wage
hike (-200 bps), currency headwind (-20 bps) partly offset by
operational efficiency (up 100 bps), above our 160 bps decline and
24.5% estimate. PAT of | 6,317 crore was largely flat QoQ and ahead
of our | 6,001 crore estimate
TCS announced an interim dividend of | 6.5/share
Demand environment remains cautious
The management commentary of a cautious outlook post the Brexit event
and a volatile macro environment especially in BFSI (40.6% of revenue)
led to a change in our dollar revenue growth estimate. We now expect
dollar revenue to grow 9.7%, 10% in FY17E, F18E, respectively. We now
expect rupee revenues, EPS to grow 11.4%, 10.2% to | 1,34,717 crore,
| 149.6, respectively, over FY16-18E.
Margins surprise despite seasonal headwinds
At 25.1%, EBIT margins declined 100 bps QoQ weighed down by a wage
hike (-200 bps), currency tailwind (-20 bps) partly offset by operational
efficiencies (120 bps), above our 160 bps decline and 24.5% estimate.
Though margins continue to be within the intended 26-28% band, we
expect margins to be at the lower end due to increased local hiring and
continued additions of laterals. Consequently, we tweak our margin
estimates to 26.1% each in FY17E, FY18E.
Attrition declines sequentially, gross hiring to be lower in FY17E
Attrition in IT services declined to 12.5% vs. 14.7% QoQ. Overall attrition
also declined to 13.6% vs. 15.5% QoQ. Q1 gross hiring was 17,792
employees including 5083 trainees and 9877 laterals while net hiring was
8,236 employees. The management reiterated that gross hiring would be
lower in FY17E (90,000 in FY16) due to lower attrition, increase in local
hiring and increasing usage of automation and productivity enhancement.
TCS has rolled out 40,000 campus offers in FY17.
Traction in digital (Cloud, IoT Analytics) continues to be encouraging
Digital revenues contributed 15.9% to revenue vs. 15.5% in Q4FY16. The
management continues to see traction in cloud transformation, IoT and
various analytics related projects in verticals such as manufacturing,
energy & utilities, communications. TCS has trained 1,65,000 employees
so far in digital technologies. TCS witnessed nine key digital wins during
the quarter across BFSI (three wins), healthcare (three wins), telecom (one
win), energy (one win) and retail (1 win).
Lowering valuation due to macro headwinds; maintain BUY
We estimate rupee revenue, PAT CAGR of 11.4%, 10.3% in FY16-18E
(average 26.1% EBIT margins in FY16-18E), vs. 24%, 22.5% reported in
FY11-16 (average 27.5% margins), respectively. We now value TCS at 18x
FY18E EPS of | 149.6 (19x FY18E EPS earlier) to arrive at our revised
target price of | 2,700 (| 2750 earlier) factoring in uncertainty due to
Brexit, a volatile macro environment and currency.

Variance analysis
Q1FY17 Q1FY17E

Q1FY16

YoY (%)

Q4FY16

QoQ (%)

Comments
Constant currency revenues grew 3.1% QoQ led by volumes (3.4%) offset by
3.0 price realisation
4.7

Revenue
Employee expenses

29,305
16,443

29,145
16,613

25,668
14,143

14.2
16.3

28,449
15,707

Gross Margin
Gross margin (%)
SG&A expenses

12,862
43.9
5,024

12,532
43.0
4,896

11,525
44.9
4,323

11.6
-101 bps
16.2

12,741
44.8
4,834

0.9
-90 bps
3.9

EBITDA
EBITDA Margin (%)
Depreciation
EBIT

7,838
26.7
491
7,347

7,636
26.2
495
7,141

7,202
28.1
454
6,748

8.8
-131 bps
8.3
8.9

7,907
27.8
495
7,412

-0.9
-105 bps
-0.8
-0.9

EBIT Margin (%)

Other income (less interest)
PBT
Tax paid

25.1
963
8,310
1,992

24.5
732
7,873
1,866

26.3
771
7,520
1,747

-122 bps
24.9
10.5
14.0

26.1
905
8,317
1,970

PAT

6,317

6,001

5,709

10.7

6,341

-94 bps EBIT margins declined 100 bps QoQ weighed by wage hike & currency headwind
6.4
-0.1
1.1
-0.4 Reported PAT was ahead of our estimate due to upbeat operating margins

Key Metrics
Closing employees
362,079 360,000 324,935
11.4 353,843
2.3 8,236 net heads were added sequentially
Overall attrition (%)
13.6
14.5
15.9 -230 bps
15.5 -190 bps Attrition continued its downward trajectory
Average $/|
67.2
66.9
63.6
5.6
67.6
-0.7
Q4FY15 PAT not adjusted for one time employee bonus expense, Source: Company, ICICIdirect.com Research

Change in estimates
(| Crore)

Old

FY17E
New % Change

Revenue
120,450 121,606
EBIT
31,144
31,144
EBIT Margin (%)
25.9
25.6
PAT
25,617
26,701
EPS (|)
130.0
135.5
Source: Company, ICICIdirect.com Research

1.0
0.0
-25 bps
4.2
4.2

Old
134,502
35,039
26.1
28,573
145.0

FY18E
New % Change

Comments

134,718
35,039
26.0
29,474
149.6

We have tweaked our estimates to reflect Q1FY17 performance

0.2
0.0
-4 bps
3.2
3.2

Assumptions

Closing employees

FY15
319,656

FY16E
353,843

Overall attrition (%)

14.9
15.5
Average $/|
61.2
65.7
Source: Company, ICICIdirect.com Research

Current
FY17E
387,843

FY18E
412,424

13.0
67.0

13.0
67.5

ICICI Securities Ltd | Retail Equity Research

Earlier
FY17E
FY18E
373,071 397,938
15.5
66.0

14.0
67.0

Comments

Higher average wage hikes (~8-12% offshore, 2-6% onsite) could help contain
rising attrition

Page 2

Company Analysis
Key highlights: Commentary from earnings call
Japan could stabilise by the end of FY17E while the LatAm
recovery continues in Q1 (grew 0.3% QoQ on top of 1.8% in
Q4FY16). The management expects Diligenta to witness a gradual
recovery
The Ignio platform, AI-based automation product in software-as-aservice category, is seeing healthy traction with Ignio now
engaged with four of Fortune 200 corporations
Sequentially, the digital business contributed 15.9% to revenue
vs. 15.5% QoQ
No spending pattern change was observed among clients post
the Brexit event
From a vertical perspective, adoption of cloud, big data, analytics
and IoT is driving demand in manufacturing, energy & utilities,
communications
Telecommunication & media is seeing traction in front-office
transformation, customer retention engagement tools and digital
marketing
Operating metric highlights
Operationally, growth was broad based across verticals, geographies and
service lines. Among verticals, communication & media (11.3% of
revenues, grew 7% QoQ in CC), energy & utilities (4.2%, 7.4%), travel &
hospitality (3.9%, 8.6%), grew above company average while BFSI
(40.4%, 1.7%), retail & CPG (14%, 2.7%) grew below company average.
Geographically, India (6.2%, 8.5%), Continental Europe (11.5%, 4.6%), UK
(14.8%, 3.8%), grew above company average while LatAm (2%, 0.3%),
North America (53.5%, 2.5%) and Asia Pacific (9.6%, 1.3%) were
relatively weaker than company average growth.
Across services lines, enterprise solutions & consulting (17.7% of
revenues, grew 6.7% QoQ in CC), engineering services (4.8%, 7%), IMS
(15.5%, 5.4%) and assurance services (8.8%, 3.2%) led quarterly growth
while ADM (38.5%, 0.4%) and BPS (11.5%, 2.8%) grew below company
average growth.

16544

15454

%
7.9

4207

4156

4145

4036

9.3 5.8 5.4

3900

3931

28

8.1
7.1

9.7 10.0 14

4362

13442

6000

3929

9000

35

21

14.3
16.216.7 17.7 11.3
13.7
15.0
3694

12000

8187

$ million

15000

11568

24.2

18000

18150

29.1

10171

21000

19958

Exhibit 1: Dollar revenues may grow at 9.8% CAGR in FY16-18E vs. 15.1% during FY11-16

3000
FY188E

FY17E

Q1

FY16

Q4

Q3

Q2

Q1

Q4

Dollar revenues

FY15

Q3

Q2

Q1

FY14

FY13

FY12

FY11

Growth, YoY

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 2: TCS growth vs. Nasscom guidance FY17E could be below Nasscom average
40
29.1

32

24.2
24

18.7

16.5

16.2
13.0

13.7
10.2

16

15.014.0

13.0
9.7

7.1

5.4 5.5

11.0

TCS dollar revenue growth

FY17E

FY16

FY15

FY14

FY13

FY12

FY11

FY10

NASSCOM guidance

Source: Company, ICICIdirect.com Research

Deal signings continue to be healthy

TCS has signed nine large deals in Q1 spread across key verticals. Two
deals each came from banking, retail with one each from manufacturing,
healthcare, airline and semiconductor. TCS witnessed nine key digital
wins during the quarter across BFSI (three wins), healthcare (three wins),
telecom (one win), energy (one win) and retail (one win).
Margins surprise despite seasonal headwinds
At 25.1%, EBIT margins declined 100 bps QoQ weighed down by wage
hike (-200 bps), currency tailwind (-20 bps) partly offset by operational
efficiencies (120 bps), above our 160 bps decline and 24.5% estimate.
Though margins continue to be within the intended 26-28% band, we
expect margins to be at the lower end due to increased local hiring and
continued additions of laterals. Consequently, we tweak our margin
estimates to 26.1% each in FY17E, FY18E due to better-than-expected
margins in Q1FY17.
Exhibit 3: Revise margin guidance to 26.1% for FY17E
32
29.1

30

28

27.8 27.6
26.5

27.0

26.3

26.8 27.0 27.2 26.9

26.3

27.1

26.6

26.1

26.6

26.1
25.1

26
24

FY17E

Q1

FY16

Q4

Q3

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

22

EBIT Margin

Source: Company, ICICIdirect.com Research

Client mining encouraging

Client transitions were also good as four client transitioned to the $50
million+ revenue taking total client count to 77, six to US$20 million+
taking total client to 179, 10 to $5 million+ taking total client to 439 and 18
new clients added in the US$ 1 million+ revenue bucket.

ICICI Securities Ltd | Retail Equity Research

Page 4

Exhibit 4: $1 million+ revenue run-rate customers increases to 847 in Q1FY17

1000
800
600

638
409

458

819 838 829 829 847

764 791 791 804
714 724 743

522

400
200

Q1

FY16

Q4

Q3

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

$1 million+ clients

Source: Company, ICICIdirect.com Research

Attrition declines sequentially, gross hiring to be lower in FY17E

Attrition in IT services declined to 12.5% vs. 14.7% QoQ. Overall attrition
also declined to 13.6% vs. 15.5% QoQ. Q1 gross hiring was 17,792
employees including 5083 trainees and 9877 laterals while net hiring was
8,236 employees. The management reiterated that gross hiring would be
lower in FY17E (90,000 in FY16) due to lower attrition, increase in local
hiring and increasing usage of automation and productivity enhancement.
TCS has rolled out 40,000 campus offers in FY17.
Exhibit 5: Attrition continues its downward trajectory
20
18

16

14.4

14
12

14.9 14.9
12.2

11.8

10.6

11.3

12.0

12.8

15.9 16.2 15.9 15.5 15.5

13.6

13.4

13.0 13.0

Overall attrition (%)

[

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 5

FY188E

FY17E

Q1

FY16

Q4

Q3

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

10

Outlook and valuation

Tata Consultancy Services (TCS) reported better Q1FY17 earnings as
growth was marginally ahead of our estimates and margins were upbeat.
Also, Q1FY17 revenue growth was broad-based led by travel & hospitality
(8.6% QoQ growth in constant currency), energy & utilities (7.4%) and
communication & media (7%) verticals; Continental Europe (4.6%) and
North America (2.5%) among geographies and engineering & industrial
services (7%), enterprise solutions & consulting (6.7%), IMS (5.4%),
among services.
We estimate rupee revenue, PAT CAGR of 11.4%, 10.3% in FY16-18E
(average 26.1% EBIT margins in FY16-18E), vs. 24%, 22.5% reported in
FY11-16 (average 27.5% margins), respectively. We now value TCS at 18x
FY18E EPS of | 149.6 (19x FY18E EPS earlier) to arrive at our revised
target price of | 2,700 (| 2750 earlier) factoring in uncertainty due to
Brexit, a volatile macro environment and currency.
Exhibit 6: One year forward rolling PE
4000

3000
2000
1000

24

16

Jan-16

Jun-16

Aug-15

Oct-14

Mar-15

Jul-13
12

Dec-13

Feb-13

Apr-12

Sep-12

Nov-11

Jan-11

Jun-11
20

May-14

Price

Aug-10

Oct-09

Mar-10

May-09

Jul-08

Dec-08

Feb-08

Apr-07

Sep-07

Source: Company, ICICIdirect.com Research

Exhibit 7: Valuation

FY15
FY16
FY17E
FY18E

Sales
(| cr)
94,648
108,646
121,606
134,718

Growth
(%)
50.3
14.8
11.9
10.8

EPS
(|)
110.8
123.2
135.5
149.6

Growth
(%)
55.9
11.2
10.0
10.4

PE
(x)
22.1
19.9
18.1
16.4

EV/EBITDA
(x)
18.5
16.9
14.7
13.3

RoNW
(%)
38.9
37.2
32.2
29.7

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 6

RoCE
(%)
68.3
79.0
74.7
75.7

Company snapshot
3,000

90.0
80.0

2,500

70.0
60.0
50.0

1,500

40.0

1,000

(%)

(|)

2,000

30.0
20.0

500

10.0

0.0
Jul-14

Sep-14

Dec-14
Price

Feb-15

Apr-15

Idirect target

Jul-15

Sep-15

Consensus Target Mean

Dec-15

Feb-16

May-16

Jul-16

% Consensus with BUY

Source: Company, ICICIdirect.com Research

Key events
Date

Event
TCS seeks alliances with companies in Japan to boost sales to $1 billion, an increase of 20-fold

Jul-11
Dec-11

Call Genie Inc enters into five-year reseller agreement whereby TCS will resell the full suite of Call Genie and UpSnap Mobile products worldwide

Feb-12
Jul-12
Oct-12

Europcar signs multi-year, multi-million euro contract with TCS to manage strategic IT services development for its French operations

Feb-13

TCS guides to beat Nasscom guidance of 11-14% for FY13 on the back of higher outsourcing demand and volume growth
To hire more workers in China to expand in Asia and reduce dependence on the Americas
Nielsen extends its contract with TCS for three years

Apr-13

TCS acquires Alti, an enterprise solutions provider, in France for | 530 crore to boost its presence in Europe

Oct-13
Apr-14

TCS climbs to record high after reporting a stellar Q2FY14 with eight-quarter high dollar revenue growth and best ever operating margins of 30.2%

Oct-14
Dec-14
Apr-15

TCS creates a strategic Japanese IT company with Mitsubishi Corporation after merging TCS Japan, ITF and NTSC. TCS to hold 51% in the combined entity
TCS misses Street expectations though delivers yet another stable quarterly earnings. The Board approves merger of its subsidiary, CMC, with itself
TCS guides for muted Q3FY15E dollar revenue growth led by weak seasonality in BFSI, retail coupled with 220 bps cross currency headwinds
The company delivers weak Q4FY15 earnings led by cross currency headwinds. However, the company expects to better industry average growth during FY16E
TCS company mixed set of Q1FY16. While $ revenue growth was soft (3.5%) in a seasonally strong quarter, EBIT margins were above estimates despite wage hike

Jul-15
The company delivers soft Q2FY15 earnings. $ revenue growth was soft (3%) in a seasonally strong quarter while EBIT margins were in-line. Achieving industry
Oct-15
Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Shareholding Pattern

Name
Tata Group of Companies
Life Insurance Corporation of India
The Vanguard Group, Inc.
BlackRock Institutional Trust Company, N.A.
Stewart Investors
Lazard Asset Management, L.L.C.
Aberdeen Asset Management (Asia) Ltd.
Capital Research Global Investors
OppenheimerFunds, Inc.
JPMorgan Asset Management U.K. Limited

Latest Filing Date % O/S Position (m) Change (m)

31-Mar-16 73.29
1,444.0
0.0
31-Mar-16 2.97
58.5
3.7
31-May-16 0.66
12.9
0.1
30-Jun-16 0.60
11.8
0.1
30-Apr-16 0.59
11.7
3.2
31-May-16 0.53
10.4
0.0
31-May-16 0.49
9.7
-0.2
31-Mar-16 0.48
9.4
0.4
31-May-16 0.46
9.0
0.0
31-May-16 0.39
7.6
0.0

(in %)
Promoter
FII
DII
Others

Jun-15 Sep-15 Dec-15 Mar-16 Jun-16

73.86 73.86 73.42 73.42 73.34
14.37 12.69 16.84 16.83 16.98
7.30
8.93
5.11
5.13
5.14
4.47
4.52
4.63
4.62
4.54

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
Life Insurance Corporation of India
Stewart Investors
First State Investments (HK) Ltd.
Unigestion
T. Rowe Price Hong Kong Limited

ICICI Securities Ltd | Retail Equity Research

Value
140.9m
121.0m
34.9m
30.3m
17.7m

Shares
3.7m
3.2m
0.9m
0.8m
0.5m

Sells
Investor name
Franklin Advisers, Inc.
Vontobel Asset Management, Inc.
FIL Investment Management (Hong Kong) Limited
Schroder Investment Management Ltd. (SIM)
DSP BlackRock Investment Managers Pvt. Ltd.

Value
-55.2m
-29.1m
-15.3m
-13.6m
-12.3m

Shares
-1.5m
-0.8m
-0.4m
-0.4m
-0.3m

Page 7

Financial summary
Profit and loss statement
(Year-end March)

| Crore

Cash flow statement

FY15

FY16E

FY17E

FY18E

94,648

108,646

121,606

134,718

50.3

14.8

11.9

10.8

COGS (employee expenses)

51,240

61,233

66,884

S,G&A expenses

16,098

18,419

Total Operating Expenditure

67,338

79,652

EBITDA

Total operating Income

Growth (%)

(Year-end March)

| Crore
FY15

FY16E

FY17E

FY18E

Profit before Tax

28,564

31,840

35,126

38,773

Add: Depreciation

1,309

1,948

2,201

2,438

74,229

(Inc)/dec in Current Assets

-2,658

-4,516

-3,349

-4,019

20,795

22,902

Inc/(dec) in CL and Provisions

3,405

-308

2,512

2,640

87,678

97,132

Taxes paid

-7,482

-7,569

-8,290

-9,150

27,294

30,678

33,928

37,586

CF from operating activities

19,369

19,115

24,801

27,057

Growth (%)

50.9

12.4

10.6

10.8

(Inc)/dec in Investments

-7,734

-5,090

-6,836

-4,000

Depreciation

1,870

1,888

2,201

2,438

(Inc)/dec in Fixed Assets

-6,055

-4,967

-5,324

-6,800

Others

2,590

3,472

5,205

7,024

CF from investing activities

-1,701

-5,209

-1,901

-1,875

Other Income less interest

PBT
Total Tax
Minority Interest
Exceptional Item
PAT before exceptional item
Growth (%)
EPS (|)
PAT after exceptional item
EPS - Reported (|)

3,140

3,050

3,399

3,625

28,564

31,840

35,126

38,773

6,656

7,503

8,290

9,150

211

123

135

148

2048

21,696

24,215

26,701

29,474

Others

0
-12,379

-368

-254

-64

-17,168

-9,616

-11,215

-12,379

Net Cash flow

500

4,291

11,686

12,803

Exchange difference

-106

140

CF from financing activities

10.3

10.4

135.5

149.6

19,648

24,215

26,701

29,474

Opening Cash

6,769

18,556

6,785

18,471

100.3

123.2

135.5

149.6

Closing Cash

18,556

6,785

18,471

31,274

FY15

FY16E

FY17E

FY18E

EPS

110.8

123.2

135.5

149.6

BV

257.0

331.7

410.3

497.0

Source: Company, ICICIdirect.com Research

| Crore
FY15

FY16E

FY17E

Key ratios

FY18E

(Year-end March)
Per share data (|)

196

197

198

198

Reserve and Surplus

50,439

65,164

80,650

97,745

DPS

Total Shareholders funds

50,635

65,361

80,848

97,943

Cash Per Share

Total debt & provision

1,237

1,105

1,105

1,105

Minority Interest / Others

1,128

502

637

786

53,343

67,409

83,031

100,274

Assets
Intangible assets

-73
-11,215

11.6

Preference shares

Tangible assets

-30
-9,479

123.2

Liabilities

Total Liabilities

28
-17,020

56.0

Balance sheet

Equity Capital

Dividend paid & dividend tax

110.8

Source: Company, ICICIdirect.com Research

(Year-end March)

Inc/(dec) in loan funds

9,376

10,607

11,650

12,659

169

119

152

184

79

44

49

54

94.2

34.4

93.7

158.7

EBIT margins

26.9

26.5

26.1

26.1

PBT Margins

30.2

29.3

28.9

28.8

PAT Margin

22.9

22.3

22.0

21.9

Debtor days

68

75

76

75

Creditor days

19

24

25

23
30.1

Operating Ratios (%)

Return Ratios (%)

CWIP

2,766

1,671

1,671

1,671

RoE

42.8

37.0

33.0

Goodwill

2,093

1,901

1,923

1,944

RoCE

52.6

46.2

41.4

37.9

169

226

226

226

RoIC

81.9

51.4

53.4

55.5

Investments-Non current
Inventory
Debtors
Loans and Advances
Other Current Assets

16

16

24

27

20,438

24,070

26,259

29,090

4,146

5,582

5,327

5,902

Valuation Ratios (x)

P/E

22.1

19.9

18.1

16.4

EV / Net Sales

4.8

4.2

3.7

3.4

5.1

4.4

4.0

3.6

5,657

26,614

28,021

28,631

Market Cap / Sales

18,556

6,785

18,471

31,274

Solvency Ratios

Total Current Assets

91,711

111,880

141,170

173,027

Debt/EBITDA

0.0

0.0

0.0

0.0

Total Current Liabilities

35,989

42,294

46,463

51,616

Debt / Equity

0.0

0.0

0.0

0.0

Application of Funds

53,343

67,409

83,031

100,274

Current Ratio

2.5

2.6

3.0

3.4

Quick Ratio

2.5

2.6

3.0

3.4

Cash

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 8

ICICIdirect.com coverage universe (IT)

CMP
Sector / Company
(|)
TP(|) Rating
473
480
Hold
Cyient (INFENT)
1,463 1,250
Sell
Eclerx (ECLSER)
48
45
Buy
Firstsource (FIRSOU)
718
950
Buy
HCL Tech* (HCLTEC)
1,073 1,400
Buy
Infosys (INFTEC)
144
175
Hold
KPIT Tech (KPISYS)
637
775
Hold
Mindtree (MINCON)
470
525
Hold
NIIT Technologies (NIITEC)
656
675
Hold
Persistent (PSYS)
2,445 2,700
Buy
TCS (TCS)
504
600
Buy
Tech Mahindra (TECMAH)
555
680
Buy
Wipro (WIPRO)
* June year end, Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

EPS (|)
P/E (x)
EV/EBITDA (x)
RoCE (%)
M Cap
(| Cr) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E
5,500
29.0
37.0
44.0
16.3
12.8
10.8
10.4
7.8
6.2
18.6
21.0
5,776
87.7
93.3 104.9
16.7
15.7
13.9
10.8
9.8
8.5
43.3
39.3
3,384
3.8
4.7
5.1
12.6
10.2
9.4
10.1
8.3
7.0
10.3
11.8
105,764
53.0
59.0
63.0
13.6
12.2
11.4
9.9
8.7
7.3
30.4
28.7
272,165
59.0
67.0
74.0
18.2
16.0
14.5
13.7
11.7
10.0
30.3
30.9
3,052
14.7
15.7
17.5
9.8
9.1
8.2
6.7
5.7
4.8
18.8
18.5
11,273
35.9
42.0
50.0
17.8
15.2
12.8
12.5
10.4
8.9
33.3
34.1
3,197
45.8
50.0
54.0
10.3
9.4
8.7
5.8
5.0
4.3
31.6
31.5
5,474
37.2
40.0
47.0
17.6
16.4
14.0
11.2
9.3
7.4
27.9
27.3
491,040 122.2 130.0 145.0
20.0
18.8
16.9
16.9
14.7
13.3
79.0
74.7
50,414
31.7
36.0
40.0
15.9
14.0
12.6
11.3
9.5
8.4
28.2
28.5
138,829
36.1
37.5
42.0
15.4
14.8
13.2
10.4
9.5
7.7
20.7
20.0

Page 9

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

[email protected]

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
[email protected]
.

ICICI Securities Ltd | Retail Equity Research

Page 10

ANALYST CERTIFICATION
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accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report.

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ICICI Securities Ltd | Retail Equity Research

Page 11