Motilal Oswal Bullish on TCS share with a target price of Rs 3730

Motilal Oswal has turned bullish on this stock, and the domestic brokerage firm has given a buy rating on the stock.

TCS is the biggest company in the Tata group of stocks. Tata group is a well-renowned business group in India, and TCS is the crown jewel of the Tata group. Motilal Oswal has turned bullish on the stock, and the domestic brokerage firm has given a buy rating on the stock. The domestic brokerage expects the stock to outperform the markets, and the firm is bullish on the TCS share.

Related: Rakesh Jhunjhunwala invests Rs 667 crore in this Tata Group stock

Reasons for bullish rating

As per the experts, concerns were raised after the TCS share declared its first-quarter results. The concerns were regarding the increase in employee benefit expenses of the firm. TCS declared the Apr-June quarter results, and the results were as follows:-

1. Net profit increased by 5% YOY- The firm's net profit increased from Rs 9008 crores in Q1 FY22 to Rs 9478 crores in Q1 FY23.
    
2. Revenue increased by 16.2% YOY- Revenue increased from Rs 45,411 crores in Q1 FY22 to Rs 52,758 crores in Q1 FY23. 
    
3. Expenses increased by 19.95% YOY- Expenses of the firm increased from Rs 33,823 crores in Q1 FY22 to Rs 40,572 crores in Q1 FY23. 
    
4. Employee Benefits expenses increased 18.23%- Employee expenses of the firm increased from Rs 25,649 crores in Q1 FY22 to Rs 30,327 crores in Q1 FY23. 

The results were not well received by the experts. But Motilal Oswal has turned bullish on the stock, and the reasons for their bullishness are: -

1. TCS has a large order book, and the order book has good earnings visibility in the short as well as the long term. 
2. A slowing macro economy will help the firm outperform its peers because of the massive order book. 
3. Portfolio rebalancing in the slowing economy will shift the focus to strong stocks like the TCS.

As per the current market price and the target given by Motilal Oswal, the investors can make a 20% return on their invested capital. The current price is Rs 3112, and the target price is Rs 3730. Some experts believe Rs 3000 to be a good entry point for long-term investors. 

Expert article: How to identify undervalued stocks? 4 key indicators

Conclusion

TCS is one of the finest IT companies in India, and the stock has underperformed recently. As per Motilal Oswal, the stock can give good returns, and the domestic brokerage is bullish on the TCS stock. Some experts have raised concerns regarding the slowing growth of the firm and increasing expenses. But Motilal Oswal believes that the TCS stock is a good buying candidate, and they are advising their clients to invest in the stock. The current market price of the stock is Rs 3112, and the domestic brokerage has a buy rating on the stock with a target price of Rs 3730. Read this article to know more about Returns generated by IT stocks in 2021.