Shares of IT major Tata Consultancy Services (TCS) declined over 1 per cent in Tuesday’s trade ahead of the company’s March quarter results. The stock fell 1.48 percent to the lowest level 3,215.10, even though the Tata group firm is expected to post double-digit profit growth, which would be the highest in the Tier I space.
shares India’s largest IT company by market capitalization has outperformed peers Infosys and Wipro so far in 2023. TCS will release its third quarter earnings on Wednesday.
Key features to keep an eye on include deal TCV/pipeline, pricing scenario and growth/margin/DSO days.
increase in revenue
Domestic brokerage and research firm Axis Securities expects TCS to report a revenue growth of 2.5 per cent quarter on quarter (QoQ) for the quarter ended March 2023.
In terms of revenue growth in constant currency terms, brokerage Nuwama expects TCS to post 1.4 per cent sequential growth, which would be the highest among its peers.
profit growth
“TCS to lead Tier 1 IT growth in Q4 FY2023. Driven by spends on cloud and digital programs, cost extraction and wallet share/vendor consolidation gains, revenue growth likely to drive revenue growth driven by exposure to impacted banking customers Will not materially impact the quarter, in our view,” said domestic brokerage Kotak Institutional Equities.
margin
Experts believe that TCS may miss the EBIT margin target. The brokerage expects TCS to report 25 per cent Ebit margin, up 50 basis points sequentially.
ICICI Direct said TCS would miss the target exit EBIT margin range of 25 per cent as lower growth would be an additional headwind. Thus, the brokerage has created only 20 bps QoQ margin expansion (vs 50 bps implied margin expansion for target exit).
Net margin for the December 2022 quarter stood at 18.6 per cent, while operating margin stood at 24.5 per cent, up 0.5 per cent year-on-year.
Axis Securities expects the operating margin of the Tata group company to expand by 97 basis points. Meanwhile, other brokerages expect operating margin to expand sequentially by 10-70 bps as layoff pressure eases.
deal
Brokerage HDFC Institutional Equities says the deal win for the Tata group firm will be $8.5 billion. Meanwhile, a strong deal win of over $10 billion is expected for TCS, assuming Kotak Institutional Equities as a normal renewal component. This did not include TCV from the mega deal with BSNL which is likely to be signed with TCS. Kotak’s TCV is over $10 billion.
disclaimer, The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before taking any investment decision,
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