Shares of Tata Consultancy Services (TCS) soared 6.3% in intra-day trades hitting a record high on Wednesday after the software major reported better than expected results on Tuesday. The stock ended Wednesday’s session at Rs 1979.60, which was 5.5% above its previous close. TCS is India’s most valued company; its market capitalisation rose by Rs 39,281 crore on Wednesday to hit Rs 7.57 lakh crore. Reliance Industries Limited is valued at Rs 6.56 lakh crore while HDFC Bank commands a market value of Rs 5.58 lakh crore. The stock is now trading at a one-year forward price-earnings multiple of 24 times compared with a multiple of 18.1 times for Infosys. The TCS stock has risen a remarkable 46.6% since the beginning of 2018 against a rise of 28% for Infosys and the Sensex’s gain of 6.5%.
It is the best-performing stock in 2018 in both the Sensex and Nifty. The second-best performing stock is Kotak Mahindra Bank in both the indices with gains of 37.3%. The IT major reported a consolidated net profit of Rs 7,340 crore, up 6.35% quarter-on-quarter (q-o-q) for the three months to June, against a Bloomberg consensus estimate of Rs 7,018 crore.
The company posted consolidated revenues of Rs 34,261 crore against a Bloomberg consensus estimate of Rs 33,979 crore. In a note to investors, Jefferies said, “TCS delivered a strong performance in q1 with q-o-q constant currency growth of 4.1% and EBIT margin of 25% ahead of our (and consensus) already high expectations. Management indicated better outlook for BFSI, with recovery even in North America, and greater visibility on return to overall double-digit y-o-y growth. Weak rupee is an additional tailwind.”
The note added that there was an uptick in performance and outlook on BFSI with the company indicating a recovery in North America which has been a drag in recent quarters. “Management said that the recovery is broad-based across small and large clients and across different sub-segments within BFSI and confirmed a better medium-term outlook for the vertical,” the note added.
Analysts are generally bullish on the stock. Of the 51 analysts who track the company on Bloomberg, 23 have a ‘buy’ rating, eight have a ‘sell’ rating while 20 have a ‘hold.’