Performance Analysis Top Indian IT Cos. Which Company delivered highest shareholder returns in 2020? What drives high P/E multiples for TCS?
Top Indian IT Companies – Overview
Market Cap (INR Cr)1
1,145,040
546,122
265,451
Market Cap (USD bn)1
156.6
74.7
36.3
Revenues (INR Cr)2
1,58,257
94,594
73,158
Revenues (USD bn)2
21.6
12.9
10.0
25.4%
23.6%
19.8%
ROCE (%) - 2020
48%
33%
27%
P/E Multiple, Times1
37.4
30.6
21.8
Average Operating margin - 2016-20 (%)
1. 2.
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As on 6th January 2020 TTM September 2020
Which Company has delivered highest returns in 2020?
Share Price (1st Jan 2020)
2,162
731
568
Share Price (31st Dec 2020)
2,863
1,256
946
Share Price Appreciation (%)
32%
72%
67%
Total TSR (%)
35%
76%
69%
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Drivers of TSR Revenue Growth (YoY) – USD Constant Currency, %
Operating Margin, %
Growth and margin improvement has led to higher TSR for Infosys and HCL
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Historical P/E Multiples
Why are TCS multiples higher than peers? Email: Support@skillfinlearning.com
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•
P/E multiples have increased for all Cos.
•
Historically, TCS has maintained higher multiples compared to Infosys and HCL
Historical performance Operating Margin, %
Revenue Growth, Constant Currency, %
Growth is similar for TCS and Infosys‌ HCL growth driven by acquisitions Email: Support@skillfinlearning.com
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TCS Commands higher margins ‌
Historical performance Return on Capital Employed, %
• Better operating performance vs peers drives higher multiples for TCS • Market expects TCS to maintain a similar performance gap vs peers … and return on capital employed Email: Support@skillfinlearning.com
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Summary
• Infosys and HCL has delivered high TSR in 2020 because of improved performance • TCS is valued at higher P/E multiple, due to its superior margins and ROCE vs peers • Multiples for all IT Companies have increased in 2020, driven by improved performance expectations
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