-------- Forwarded Message --------
Subject: TCS: Fatal Combination Of "Scarce Growth, Brexit Woes & US Election Risk" Can Bring The Stock To 2280-2100 Level--Lack Of Automation/AI Tech Can Hurt
Date:   Thu, 13 Oct 2016 08:01:06 +0530
From:   Asis Ghosh <asis...@gmail.com>
Reply-To:       asis...@gmail.com

*Trading Idea/Technical Outlook: TCS*
*LTP: 2380*
*Sell on rise around 2400-2425 OR 2465-2490;*
*TGT: 2310-2280*-2245-2200-2160*-2115/2095 (1-3/6M)*
*TSL> 2435 OR > 2505*

*Note: *Sustaining above 2435 area, TCS may further rally up to 2465-2490 zone, which may offer strong supply for the stock and only consecutive closing (3 days) above 2505 area, it may further rally up to 2530-2585-2615-2660* & 2700-2745* in the short to mid term (alternative bullish case scenario).

Anyone having long position in the counter, may also watch 2350-2310/2280 area closely as the near positional support zone.

For investment purpose one can buy/accumulate in dips around 2280-2160-2095 area depending upon the overall market sentiment and underlying news flow.

*Fundamental outlook:*

For TCS, Q1FY17 EPS: 32.06 (QOQ: 32.18; YOY: 291.7) (Consolidated)

Q1FY17 TTM EPS: 126 (Actual)

Projected Q2FY17 EPS: 31.80 (Consensus 31.60)

Projected Q2FY17 TTM EPS: 126.92

Projected FY17 EPS: 127.05(Consensus: 133.50)

*Average PE: 20 (as enjoyed by the co under 10-12% modest CAGR phase)*
*Projected Average PE: 16 (Industry average 18)*

(market may give TCS 15-18x after recent guidance warning and likely tepid growth phase in the coming quarters because of lack of automation/AI technology, woes of Brexit, risk of US election, weakness in BFSI discretionary spending in IT for North American clients)

*Present fair value: 2015-2030 (based on actual & projected Q1/Q2FY17 TTM EPS)*
*Projected fair value: 2035-2135 (based on projected FY17 EPS)*

Today TCS will publish its Q2FY17 numbers and market is expecting:

PAT: Rs.6263 cr (-0.8%; QOQ:6318)

Revenue growth: +1.50% (INR) & 1.78% (USD)

EBITDA: Rs.7612 cr (+3.6%)

EBITDA margin: 25.60% (QOQ: 25.10%)

In the absence of any decent volume growth, TCS is expected to report lower Q2 PAT on account of likely scenario of employee cost. As the company was not so active in the past to acquire small/start up co in automation & AI unlike Cognizant & Infy to some extent, it has to upgrade its employee skill and incur additional cost significantly. Lack of relevant automation/AI technology may be also one of the prime reason for TCS's tepid growth apart from various geo-political events & cross currency headwinds.

Market will keenly watch management guidance about H2FY17, because traditionally this is a lean quarter for IT outsourcing company.TCS has to perform much better in the coming quarters in order to achieve its own revised guidance of 7.1% growth in CC; otherwise it may again issue another guidance warning today or in the coming days.

*Analytical Charts:*







Thanks & Regards,

Asis Ghosh

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