TCS Q1 Results Review - Heads You Win, Tails You Don’t Lose: HDFC Securities

HDFC Securities Institutional Equities

Tata Consultancy Services Ltd.'s Q1 performance reflects signs of recovery and an improving growth trajectory. The strongest sequential growth in the last six quarters at 2.2% QoQ constant currency, growth in headcount following successive decline, improved banking, financial services and insurance composition in deals and commentary of recovery in NorthAm banking are positives.

We reckon that the leakages in renewals/ongoing projects have troughed—evident from management commentary that speaks of similar client spending yet better predictability (versus 50/100 basis points variance in the previous quarter).

Despite the pressure in discretionary spending, the execution engine remains strong and the current period in FY25E will see margin improvement (pyramid lever) following the wage hike impact in Q1.

We continue to believe that growth skew driven by large engagements (related party) and Regional Market aid revenue visibility for FY25E.

TCS remains the best play in tier-1 IT to capture more of the same (gradual recovery/superior execution) or spurt in industry demand (strong digital credentials)—heads you win, tails you don’t lose.

Maintain Add on TCS with the target price at Rs 4,510, based on 28 times Jun-26E earnings per share.

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