Just going by some of the brokerage notes on this morning it is a bit of a mixed bag for instance JP Morgan is underweight, Morgan Stanley is equal weight and you have got Jefferies which maintains a hold with the target price at about 3500. Just wanted to understand given the kind of move that we have seen in TCS of late what your outlook is on the kind of numbers that they delivered and how you are looking at the overall valuations allowing the stock to command its current market price?
I think the global backdrop and the macro backdrop remains weak. So we are still not sure but I think the overall TCS’s numbers have been quite positive. They have been a tad better than our expectations both in terms of revenues and margins. I think US order book also is more than $4 billion so that is good. I think the growth areas or engine drivers continue to remain US and UK so roughly 70% of your revenues are largely sorted.
I think the only issue largely is the continental Europe where the outlook is still quite hazy which contributes about 50% kind of an overall revenue mix. Our sense is that overall while exit margins could be 25% this year, next year the margin improvement can be even better because normal historical margin range has been of the range of 26% to 28% and US and UK have delivered well both in terms of growth and also in terms of order book.
We would maintain about low double digit kind of a growth in terms of top line and bottom line. Previous rating for us was a buy rating on a forward basis of about 22 times. Lastly there will be some tweaking of numbers but overall we are looking to maintain a buy on this particular stock. But overall I think the numbers are quite decent, I think unless and until the global macro backdrop sort of suddenly does not improve, probably sideways movement in the stock is what we would expect in the near term but in the second half our sense is that the stock should do well.
Give us your top fundamental ideas what we have got for our viewers today one idea?
We have been liking number of companies in the midcaps and small caps besides large caps. So
is one of the companies we are looking at where target price is Rs 410. We feel that domestic capex should drive better margins and so there is good scope for rerating for this particular company. This is one of the top picks that we have.
So you said you like small caps, midcaps and large caps. So for the large caps what are your top fundamental picks?
In the large caps we like
. The target price for the stock is Rs 3050. We like also because our sense is that their schemes have started to do well and the market share erosion is reversing. I think within bank we like as this bank is still trading at about 10 to 15% discount compared to its historical average and I think largely most of the banks are doing fine.
We like given the fact that this stock has underperformed for a good period of time. Our sense is that with the spate of launches next year and overall growth for passenger vehicle, we are looking at double digits. So this company should be a beneficiary of that. In addition to that I think margin recovery is around the corner for most of the auto OEMs including investment into the quarter and Maruti from that perspective is looking good to us with the target price of Rs 11200.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
