TCS retained its outlook for FY15 – of a healthy demand environment, accelerating organic revenue growth in FY15 and with normal seasonality of a stronger 1H v/s 2H. We estimate 5.5% QoQ growth USD3.7b in 1QFY15E. (50bpimpact from cross currency)
TCS recently reported its Q1FY15 results, which were in line on revenue front & at operating level. However, the net profits were above estimates, aided by higher other income. Buy on dips.
Q3FY15 Recommendation: Maintain hold on Alembic PharmaIndiaNotes.com
For the quarter, Alembic Pharma reported muted sales growth of 4.6% yoy to Rs 497 cr, below than the street expectations of Rs 561cr on account of (1) discontinuation of low margin products in international markets (2) Failure to gain expected market share in newly launched products (3) Price erosion due to higher competition in existing products (4) Lower growth in domestic portfolio because of high base effect in Q3FY14. However, it still could manage to sustain its healthy EBITDA margins at 21.2% as compared to 19.8% in Q2FY15/21.7% in Q3FY14. The management has reiterated its earlier guidance of 100-125 bps improvement in margins for next 3-4 years to take the margins to 23-24% levels. Alembic Pharma is awaiting its USFDA inspection this year for both its formulations as well as API facilities.
TCS recently reported its Q1FY15 results, which were in line on revenue front & at operating level. However, the net profits were above estimates, aided by higher other income. Buy on dips.
Q3FY15 Recommendation: Maintain hold on Alembic PharmaIndiaNotes.com
For the quarter, Alembic Pharma reported muted sales growth of 4.6% yoy to Rs 497 cr, below than the street expectations of Rs 561cr on account of (1) discontinuation of low margin products in international markets (2) Failure to gain expected market share in newly launched products (3) Price erosion due to higher competition in existing products (4) Lower growth in domestic portfolio because of high base effect in Q3FY14. However, it still could manage to sustain its healthy EBITDA margins at 21.2% as compared to 19.8% in Q2FY15/21.7% in Q3FY14. The management has reiterated its earlier guidance of 100-125 bps improvement in margins for next 3-4 years to take the margins to 23-24% levels. Alembic Pharma is awaiting its USFDA inspection this year for both its formulations as well as API facilities.
Idea Cellular: Q1FY15 results above estimates, buyIndiaNotes.com
IDEA’s 1QFY15 consolidated EBITDA grew 19.5% YoY and 12.6% QoQ to INR25.1b vs our estimate of INR23.7b. PAT increased 49% YoY and 23.5% QoQ to INR7.3b (estimate INR6.8b). Maintain buy.
For a report overview of this report please contact sara.peerun@visiongainglobal.com
(+44 (0) 20 7336 6100) or refer to our website:
https://www.visiongain.com/Report/1834/Aerospace-Defence-Telemetry-Market-2017-2027
https://www.visiongain.com/
The quarter one investor update of July highlights the achievements of GHCL in chemicals, textiles and consumer products. It also highlights the current pandemic situation and the impact it has made on the industry. With an emphasis on the core values, GHCL focuses on profitable yet sustainable growth that can be noted in the incentives and approaches it takes.
Vaibhav Global Q1FY15: Outlook continues to remain positive; HoldIndiaNotes.com
As expected, the company reported sales growth of 20.3% yoy to Rs 301 cr, on account of sluggish TV Sales. Q1 is a temporary blip and Nirmal Bang expects the growth to be normalized from Q3 onwards (Q2 is seasonally weak quarter for the company). Hold
Sector Updates: Air Conditioner Sector Institutional Research Report | HDFC s...hdfcsecurities1
The air-conditioner industry has witnessed several headwinds during FY18, led by GST transition and the change in energy efficiency ratings. As per Bureau of Energy Efficiency (BEE), the Air conditioner industry grew at a modest pace of 7% in volume terms during FY18 to 6.9mn units vs. 37% growth in FY17
Ipca Laboratories: To voluntarily stop supplies to US; Cut in estimatesIndiaNotes.com
IPCA has voluntarily stopped shipment from its API facility in Ratlam, India post the observations (form 483) listed by the US FDA in its recent inspection. IPCA received six observations, of which two relate to data integrity. This development will also have an impact on the formulations plants
Idea Cellular: Q1FY15 results above estimates, buyIndiaNotes.com
IDEA’s 1QFY15 consolidated EBITDA grew 19.5% YoY and 12.6% QoQ to INR25.1b vs our estimate of INR23.7b. PAT increased 49% YoY and 23.5% QoQ to INR7.3b (estimate INR6.8b). Maintain buy.
For a report overview of this report please contact sara.peerun@visiongainglobal.com
(+44 (0) 20 7336 6100) or refer to our website:
https://www.visiongain.com/Report/1834/Aerospace-Defence-Telemetry-Market-2017-2027
https://www.visiongain.com/
The quarter one investor update of July highlights the achievements of GHCL in chemicals, textiles and consumer products. It also highlights the current pandemic situation and the impact it has made on the industry. With an emphasis on the core values, GHCL focuses on profitable yet sustainable growth that can be noted in the incentives and approaches it takes.
Vaibhav Global Q1FY15: Outlook continues to remain positive; HoldIndiaNotes.com
As expected, the company reported sales growth of 20.3% yoy to Rs 301 cr, on account of sluggish TV Sales. Q1 is a temporary blip and Nirmal Bang expects the growth to be normalized from Q3 onwards (Q2 is seasonally weak quarter for the company). Hold
Sector Updates: Air Conditioner Sector Institutional Research Report | HDFC s...hdfcsecurities1
The air-conditioner industry has witnessed several headwinds during FY18, led by GST transition and the change in energy efficiency ratings. As per Bureau of Energy Efficiency (BEE), the Air conditioner industry grew at a modest pace of 7% in volume terms during FY18 to 6.9mn units vs. 37% growth in FY17
Ipca Laboratories: To voluntarily stop supplies to US; Cut in estimatesIndiaNotes.com
IPCA has voluntarily stopped shipment from its API facility in Ratlam, India post the observations (form 483) listed by the US FDA in its recent inspection. IPCA received six observations, of which two relate to data integrity. This development will also have an impact on the formulations plants
BHARTI’s 1QFY15 EBITDA grew 18% YoY and 5.7% QoQ to INR 77.2b (est INR74.6b) driven by strong performance in India mobile business. Consolidated revenue grew 13.3% YoY and 3.3% QoQ to INR 229.6b (vs est INR224.9b).
TCS’ 1QFY15 revenue grew 5.5% QoQ to USD3.6b (and 4.8% QoQ CC), in line with estimate. EBITDA margin declined 210bp QoQ to 28.8%, v/s estimate of 29.2%. EBIT margin (26.3%) was lower than est. (27.6%) due to a one-time depreciation charge.
Blue Star Infotech Q1FY15: Revenues grow 13% y-o-y; Positive outlookIndiaNotes.com
Blue Star reported Q1FY15 numbers in line with our expectations. Revenues for the quarter have grown by 13% YoY; EBIDTA margins went down by 180 bps YoY. Nirmal Bang continues to be positive about the stock and recommends buy for long term.
Driving growth and differential performance among Class I railroadsDeloitte United States
Building a precision-scheduled railroad generated substantial benefit for Class I railroads and their shareholders when compared to their prior performance. However, with nearly all railroads pursuing the same strategy, we see differential performance among the Class I railroads driven primarily by changes in industrial production rather than strategic choices by management and Boards of Directors. Breaking away from the narrow range of industry peer performance will likely require more deliberate choices about the scope of operations and services that offer good prospects for returns on capital. Railroad executives should shift attention from operations to the configuration of commercial functions to help realize distinct competitive advantages and improved shareholder returns.
Following the Prime Minister’s intervention in Parliament and the developments on the economic front, the Confederation of Indian Industry said that the reiteration of Government’s commitment to economic revival was timely and pertinent. “CII had put forward industry’s ten-point agenda for economic revival to Government last month,” stated Mr Kris Gopalakrishnan, President, CII. “It is heartening that Government is taking action to counter the economic downswing.”
“Responding to the fast deteriorating economic parameters, CII had presented ‘An Agenda for Economic Revival’ to the Government in July. While the Government has outlined targets for CAD and fiscal deficit, CII said that specific steps are urgently required to stimulate growth and to improve investor sentiments,” said Mr Gopalakrishnan.
In its ten-point agenda, CII has recommended a comprehensive set of actionables, said the CII release issued here today.
PI Industries: Another strong performance; Sales up 16% in Q1FY15IndiaNotes.com
PI Industries posted strong quarter with 16% growth in sales for the quarter. However, key highlight of the quarter is improvement in margins which has moved up by ~348 up yoy and ~859 bps qoq. Hold for a target of Rs465.
Indian Bank Q1FY15: Buy for a target of Rs230IndiaNotes.com
Indian Bank’s 1QFY15 reported PAT declined 35% YoY to INR2.1b (31% below expectation). While NIM was largely stable QoQ at 2.4%, loan growth of 8% YoY (expectation of 15% YoY) led to 9% below estimated NII of INR10.7b; buy.
Similar to TCS: Status quo, on track for revenue acceleration; maintain neutral - Motilal Oswal (20)
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TCS: Status quo, on track for revenue acceleration; maintain neutral - Motilal Oswal
1. Ashish Chopra (Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Siddharth Vora (Siddharth.Vora@MotilalOswal.com); +91 22 3982 5585
13 June 2014
Update | Sector: Technology
TCS
CMP: INR2,215 TP: INR2,200 Neutral
Status quo; on track for revenue acceleration
Margins receding to the targeted band on headwinds
TCS retained its outlook for FY15 – of a healthy demand environment,
accelerating organic revenue growth in FY15 and with normal seasonality of a
stronger 1H v/s 2H. We estimate 5.5% QoQ growth USD3.7b in 1QFY15E. (50bp
impact from cross currency)
1Q traction will be driven by larger verticals which will grow close to company
average while verticals like media and healthcare & life sciences should grow
faster on a small base. India revenues should be flattish, US continues to see
discretionary spend and traditional outsourcing drives Europe.
Margins will see headwinds of over 300bp QoQ, from wage hikes (over 200bp and
appreciation of INR (~100bp). We expect offset from growth and productivity
gains, and model 160bp QoQ decline to 27.6%.
1QFY15 Expectations: Momentum intact, on track for a better FY15
TCS’ commentary on the outlook is unchanged – with expectation of better
organic growth in FY15 v/s FY14, and growth in 1H being stronger than that
in 2H
We expect USD revenue growth to come in at 5.5% for the quarter with cross
currency impact of +50bps. This implies YoY growth of 16.8%, compared to
16% in 1QFY14
Due to appreciation in INR during the quarter Rupee revenues will have a
negative 300bp impact. This drives our Rupee revenue estimate of
INR220.7b, +2.4% QoQ.
We estimate 1QFY15 USD revenue growth at 5.5%
Source: Company, MOSL
Margin faces headwinds from wage hike and currency
TCS announced higher wage hikes for FY15, and that is likely to have an
impact of over 200bp QoQ. Currency appreciation introduces additional
100bp headwind for the margins during the quarter.
2,412
2,525
2,586
2,648
2,728
2,853
2,948
3,040
3,165
3,337
3,438
3,503
3,696
7.5%
4.7% 2.4% 2.4% 3.0%
4.6% 3.3% 3.1% 4.1% 5.4%
3.0% 1.9%
5.5%
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15EUSDRevenues QoQ Growth (%)
Investors are advised to refer through disclosures made at the end of the Research Report.
BSE Sensex S&P CNX
25,228 7,542
Stock Info
Bloomberg TCS IN
Equity Shares (m) 1,958.7
52-Week Range (INR) 2,384/1,382
1, 6, 12 Rel. Per (%) -6/-11/19
M.Cap. (INR b) 4,338.0
M.Cap. (USD b) 72.6
Financial Snapshot (INR Billion)
Y/E March 2014 2015E 2016E
Sales 818.1 946.7 1,080.5
EBITDA 251.3 270.6 304.4
PAT 191.2 207.4 237.8
EPS (INR) 97.6 105.9 121.4
EPS Gr. (%) 37.0 8.5 14.7
BV/Sh. (INR) 282.5 326.9 399.1
RoE (%) 39.7 34.8 33.4
P/E (x) 22.7 20.9 18.2
EV/EBITDA (x) 16.5 15.1 13.2
Div. yield (%) 1.4 1.7 1.9
Shareholding pattern (%)
As on Mar-14 Dec-13 Mar-13
Promoter 73.9 73.9 74.0
Dom Inst 5.4 5.3 5.4
Foreign 16.1 16.3 16.1
Others 4.6 4.5 4.5
Stock Performance (1-year)
2. TCS
13 June 2014 2
Impact from a high growth rate and contribution from productivity
improvement should help partially offset the impact from headwinds, and we
expect the decline to be limited to 160bp, implying EBIT margin of 27.6% in
1QFY15.
We estimate margins to decline by 160bps to 27.6%
Source: Company, MOSL
TCS continues to maintain its target band for margins as 26-28% going forward
and may tweak the rate of investments going forward in the event of additional
headwinds like appreciation of INR.
Our PAT estimate for the quarter stands at INR49.5b, down 6.6%, on account of
appreciation in INR, lower operating margin, and little impact from forex hedges
compared to gains worth INR2b in 4QFY14.
Segmental traction
Growth will be broad based across verticals with large verticals growing close to
company average and smaller verticals like healthcare & life sciences and media
are expected to grow above company average.
Vertical performance in 4QFY14
Verticals
Contr. to
overall rev (%)
QoQ Gr. (%)
Contr. to incr
rev (%)
4 Quarter
CQGR
BFSI 42.9 2.4 53.5 3.2
Mfg 8.6 (0.4) (2.0) 3.9
Telecom 9.3 (1.3) (6.6) 3.6
LS & Healthcare 6.1 5.3 16.7 8.4
Retail & Distr 13.5 (0.3) (2.4) 3.8
Transportation 3.5 1.9 3.5 4.4
Energy and Utilities 3.8 1.9 3.8 3.6
Media & Entmnt 2.6 15.2 18.5 9.3
Hi-Tech 5.3 1.9 5.3 1.7
Others 4.4 4.3 9.7 (0.6)
Source: MOSL, Company
In terms of geography, revenue momentum in US continues – with greater
project based or discretionary demand. Europe is seeing sustained momentum
of traditional outsourcing spend picking up. Growth will be driven by developed
geographies while India revenues are expected to be flattish during the quarter.
3. TCS
13 June 2014 3
Geography performance in 4QFY14
Geographies
Contr. to
overall rev (%)
QoQ Gr. (%)
Contr. to incr
rev (%)
4 Quarter
CQGR
North America 52.2 0.9 25.8 3.1
Latin America 2.2 (2.5) (3.1) 1.4
UK 17.8 3.6 33.7 5.1
Continental Europe 12.1 6.3 38.5 10.4
India 6.2 0.3 0.9 (5.1)
APAC 7.4 1.9 7.4 4.0
MEA 2.1 (2.7) (3.2) 3.6
Source: MOSL, Company
In terms of services, growth continues to be broad-based across the offerings.
TCS’ proprietary cloud offering iON remains work in progress, still small in terms
of revenue size to impact overall company performance,
Change in depreciation policy in line with the revised Companies Act
To be in accordance with the Companies Act 2013, TCS effected change in its
depreciation policy. The company has taken the opportunity to further
rationalize the policies for depreciation – bringing different policies across
subsidiary companies under one standard.
TCS will be following straight-line depreciation with lower asset life from the
previously followed WDV method. This will result in: [1] a one-time impact in
Indian GAAP of write back of 4-5% of net Fixed Assets as an exceptional item
and [2] one time impact in IFRS of additional charge of ~2% of Fixed Asset added
to normal depreciation. We will factor the same into our estimates as clarity on
the exact impact of the same emerges in 1QFY 15 financials.
Valuation and view
Our estimates remain largely unchanged after the management’s latest outlook.
Over the past four years, TCS has led the incremental revenues as well as operating
profits not just domestically, but also in the global arena (compared to peers
multiple times its size); and its market cap is second only to IBM. At 18.8% USD
revenue CAGR over FY14-16E, we expect TCS to continue leading the industry
growth with excellent execution. At 20.9x FY15E and 18.2x FY16E EPS, we remain
Neutral on valuations. We would treat any corrections as an entry opportunity.
4. TCS
13 June 2014 4
Story in charts
TCS continues to lead industry growth…
Source: Company, MOSL
…but India headwinds cripple outperformance
Source: Company, MOSL
Revenue growth finally getting delinked to headcount...
Source: Company, MOSL
...as competitive intensity gradually pulls down pricing
Source: Company, MOSL
Operating at peak efficiency, reflected in utilization...
Source: Company, MOSL
...Expect margins to settle lower and EPS to lag rev. growth
Source: Company, MOSL
10. TCS
13 June 2014 10
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Disclosure of Interest Statement TATA CONSULTANCY SVCS LTD
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