TCS Q1 Results Review - Beat Led By BSNL Ramp-Up, Commentary Status-Quo: Dolat Capital

Dolat Capital Report

Tata Consultancy Services Ltd. reported constant currency revenue growth of 2.2% QoQ, (above our estimate of 1.9%), mainly led by ramp-up of BSNL deal.

Operating profit margin was down 130 basis points QoQ at 24.7% (our estimate: 24.7%), due to wage hike impact & higher equipment cost.

TCS' management continues to maintain a cautious outlook and has negated about the sustainability of growth momentum owing to macro uncertainties. Nevertheless, they anticipate better FY25E growth over FY24 citing improved spending in high return on equity centric deals.

We slightly tweak our FY25/FY26E EPS estimates by -1.5%/-0.2% taking into account the current commentary.

Maintain ‘Reduce’ rating with target price of Rs 4,070 at 27 times on FY26E (implies ~three times price-to-earning growth).

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