TCS A 'Buy' Due To Undemanding Valuations, Says Motilal Oswal — Check Target Price, Potential Upside And More

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Motilal Oswal Report

Motilal Oswal has reiterated its Buy rating on Tata Consultancy Services Ltd., valuing the stock at 26x FY28E EPS and setting a target price of Rs 4,400. This implies a potential 37% upside from current levels.

The brokerage believes the risk–reward remains favorable as the IT major enters the next growth cycle, supported by strong fundamentals and a robust demand outlook.

Valuation and View

The brokerage maintains its estimates for FY26/27/28 and expect TCS to deliver 4.5%/7.2% YoY CC growth in FY27/FY28, supported by a demand recovery from H2 FY27 and further acceleration in FY28.

Ebit margins are expected at 24.8%/25.0% in FY27/FY28. Over FY26-28, this translates into a ~5.7% CAGR in USD revenue and ~9.0% CAGR in Indian rupee EPS.

With its market leadership position and best-in-class discipline execution, the company has been able to sustain its industry-leading margin and demonstrate superior return ratios vs peers.

Valuations remain undemanding:

At current valuations, TCS trades at a ~9% discount to its 10-year average P/E and at a ~19% discount to its five-year average. As AI adoption transitions from pilot programs to scaled, revenue-generating deployments, the brokerage sees an improving growth-visibility backdrop.

Five pillars of TCS’s AI strategy

1. internal transformation with a focus on driving an AI-first operating model;

2. redefining services, including a new AI services transformation unit and a human + AI delivery model;

3. a future-ready talent model centered on AI fluency;

4. making AI real for clients through industry- and domain-specific solutions; and

5. an AI ecosystem strategy spanning partnerships, merger and acquisition, and new venture creation.

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