UBS raises TCS stock to ‘buy’, expects 17% upside

Analysts believe that the ramp-up of large deals will drive growth in the long term for India’s biggest IT services firm

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Global brokerage firm UBS upgraded the stock of Tata Consultancy Services (TCS) to “buy” from “neutral” rating, raising the target price to Rs 4,700 from Rs 4,000 apiece, implying an upside of 17 percent from current levels.

The bullish call came as analysts believe that the ramp-up of large deals will drive growth in the long term.

The stock of India’s biggest IT services firm has surged 5.4 percent this year against a 0.7 percent rise in the benchmark Sensex. TCS hit a 52-week high of Rs 4,184 on February 9.

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Analysts at UBS expect TCS to lead its peers in terms of revenue growth by 100-150 basis points (bps). “TCS is likely lead its peers with improvement in margins by FY25. We believe market is not pricing in company’s lead to its peers in, given a dividend consensus,” the brokerage firm said.

Some of the growth drivers include ramp-up large deals such as BSNL, NEST, Aviva, among others. Apart from that, revival in BFSI segment and cloud migration projects would also drive growth, analysts said.

Valuation-wise, TCS is at the lower end of its long-term trading premium versus peers, they said.

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Earlier, Elara Securities reiterated its “buy” call for TCS, with a target price of Rs 4,430. “We slightly raise FY25E EPS estimates 3-4 percent and roll-forward by a quarter.  We maintain bullish call as TCS offers best earnings stability among peers, supported by margin resilience, strong delivery engine, robust partnerships with hyperscalers and sturdy deal wins,” the brokerage firm said.

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