TCS Q3 FY12 Results Analysis

In the third quarter of FY 2011-12  TCS has reported a 13.5% quarter-on-quarter growth in its sales and an 18.4% QoQ increase in its net profits.

Results Analysis:

• Net sales grew by 13.5% QoQ in 3QFY12, mainly due to depreciation of rupee as the growth in volumes was 3.2% QoQ during the quarter.
  
• Sales grew by 31.2% Year-on-Year (YoY) for the nine months ended December 2011 (9MFY12)
• Operating margins expanded by 2.1% QoQ to 29.2% against 27.1% in the previous quarter.
  
• Net profits grew by 18.4% QoQ. For 9MFY12, net income increased by 21.6% YoY.
• Close to 12,000 net employees have been added during the quarter. Attrition rate stands at 12.8%.
• Added 40 new clients during the quarter. Have more than 1000 active clients currently.
• Proposed an interim dividend of Rs 3 per share for this quarter.

What to expect from TCS Stock?

• At the current price of Rs 1,080, the stock is trading at a multiple of around 16 times the estimated FY14 earnings.
• TCS witnessed growth across all major business segments and geographies. As per the management, pricing was stable during the quarter.

  Management of TCS stated that a majority of its clients has indicated to keep IT budget flat or higher despite the global headwinds. The deal pipeline is healthy as well.

• As per the management pricing is expected to be stable in the near term and operating margin is going to stay around 27%.
• TCS recruited around 51,000 during the past nine months and has a plan to add15,000 more during the last quarter of the current financial year.
  
• Considering the healthy growth prospects and its deal pipeline TCS is going to perform well despite the global uncertainties. BUY the stock with 3 to 4 years perspective to have around 18% annual returns.