Buy TCS; target of Rs 3580: Motilal Oswal

TCS reported revenue of USD6.87b in 2QFY23, up 4.0% QoQ in constant currency (CC) terms, 50bp above our estimates. The company reported deal wins of USD8.1b (up 7% YoY/flat QoQ, book-to-bill ratio at 1.2x), in line with its historical trajectory. EBIT improved 90bp QoQ to 24% (vs. our estimate of 23.5%) despite supply pressures.

We have slightly tweaked our FY23/FY24 EPS. We expect a USD revenue CAGR of 8.1% over FY22-24 and INR EPS CAGR of 13% during the same period (aided by INR depreciation). Our TP of INR3,580 implies 27x FY24E EPS, with a 15% upside potential. We reiterate our Buy rating on the stock.

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