Analyst's Pick: Tata Consultancy Services

CMP: Rs 480.80
Target price: NA
JP Morgan has maintained its ‘overweight’ rating on TCS against the backdrop of several cost-cutting measures adopted by the IT company. The broking outfit expects resiliency in TCS’ operating margins during the next fiscal, but has also cautioned of near-term weakness in earnings growth. “TCS is looking to reduce variable portion of employee salaries, has increased working hours of employeesas per news reports. These cost-cutting measures are largely in line with our expectations; top Indian IT companies would be able to defend margins next fiscal despite pricing pressure,” the JP Morgan report said. According to the broking house, revenue growth remains the key variable of debate. “We continue to believe that top-tier players can deliver flat revenues in the next fiscal due to market share gains and Satyam issue. Given low investor expectations, a flat revenue would be enough to drive share price,” the report added.
Source: ET