How TCS shares are likely to perform tomorrow after Q2 results

on BSE, TCS shares closed above 3,121.20 56.25 or 1.84%. At closing price, the market valuation of the company 11,42,063.11 crore.

Rajesh Gopinathan, CEO, TCS said, “The environment is challenging and it requires all of us to be vigilant. We saw good demand resilience across all our markets.”

Emkay Global Financial Services expects TCS stock to react on a ‘neutral’ basis after Q2 Result, Among the key positives are broad-based growth, steady progress on customer mining (5 new customers added to $100+ million buckets in Q2), and deal intakes at $8.1 billion (book-to-bill ~1.2x).

On overall financial performance, Emkay’s note said, “TCS reported revenue of $6.88 billion, up 1.4%/8.6% QoQ/YoY (15.4% YoY CC and 4.1% QoQ CC), slightly above our expectations of $6.91 billion. Adjusted EBIT margin increased by ~90bps QoQ to 24% in line with our expectations. 104.3 billion vs our estimate 105.4 billion due to lower other income.”

In the quarter, Gopinathan also said, “We posted strong, profitable growth across all of our industry verticals and across all our key markets. Our order book is well maintained with a healthy mix of growth and transformation initiatives, cloud migration and outsourcing.” The way is catching up. Engagement. As customers prepare for a more challenging environment ahead, technologies such as the cloud, now adopted, will have to be fully leveraged to realize the value promised. This imperative in TCS Combination of relevant knowledge, technology expertise and performance rigor to accomplish this.”

In terms of industry-wide, on a year-on-year basis, TCS growth was led by Retail & CPG (up 22.9%), Communications & Media (up 18.7%), and Technology & Services (up 15.9%) . Manufacturing as well as Life Sciences and Healthcare verticals grew over 14.5%, while BFSI grew over 13.1%. Geographically, among the major markets, North America led with growth of over 17.6%; Continental Europe increased by over 14.1% and the UK by over 14.8%. Among emerging markets, India grew over 16.7%, Latin America grew over 19.0%, Middle East and Africa grew over 8.2% and Asia Pacific grew by over 7.0%.

Meanwhile, Mitul Shah, Head of Research, Reliance Securities said, “TCS reported marginally better performance in 2QFY23, with EBIT margin of 24%, 30bps higher than our estimate of 23.7%.” Shah said, “Revenue increased 1% QoQ / 9% YoY in USD terms to $6,877 million, versus our estimate of $6,878. Revenue growth in CC terms was 4% QoQ. EBIT 9% QoQ (up 11%) ) grew by YoY) to 132.7 billion while the EBIT margin was 24% (91bps QoQ / down 160bps YoY), 30bps above our estimate of 23.7%. Its net income stood at Rs 104 billion (up 10% QoQ / 8% YoY). , while adjusted margin came in at 18.9% versus our estimate of 18.7%.”

As of September 30, 2022, the TCS workforce stood at 616,171 employees – with a net increase of 9,840 during the quarter. The attrition for IT services was 21.5% based on the last twelve months. TCS expects the job loss rate to come down in the second half of FY23.

Milind Lakkar, Chief Human Resources Officer, TCS, said, “Our investments in capacity building and organic talent development have allowed us to substantially grow our business ahead of the increase in workforce this quarter. We believe Our quarterly annual attrition peaked in Q2 and should see less. Below this point, while seasoned professionals’ compensation expectations are moderate.”

On TCS valuation, Shah said, “We believe that IT services will remain untouched by deteriorating global macros in terms of rising inflation, economic slowdown, currency adversity and possible cut in spending. Revenue growth will decelerate in the low double digits. FY24E “While a decline in QoQ in the order book, pronounced lower employee additions, higher attrition, and lower pricing power, valuations close to its historical average will cause several contractions. Therefore, currently, we have a SELL rating on TCS.”

TCS shares declined nearly 8% in the second quarter of FY23. The start of October has been largely positive and TCS shares are up over 4.5%.

TCS declared second interim dividend of Rs. 8 per equity share for the financial year FY23. The company’s board has set October 18 as the record date for determining the eligible shareholders for the dividend benefit. TCS plans to pay the second interim dividend on November 7, 2022.