Tata Consultancy Services' Q2 Sees Healthy Beat Even With Erratic Delays in Decision Making

Wide-moat Tata Consulting Services' second-quarter results beat our expectations on the top and bottom lines as the business appeared even more resilient than expected given the weak macroeconomic environment. While TCS said it is experiencing sporadic delays in decision-making on new deals, we find the level of demand for TCS’ digital transformation offerings, especially within North America, promising. Furthermore, we find it comforting that larger transformation projects are being prioritized over smaller ones. We are increasing our fair value estimate to INR 2,840 from INR 2,700 as we factor in the greater strength from the quarter. Shares are up 2% upon results, leaving the IT services giant trading in fairly valued territory, in our view.