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Dolat Capital Report
Tata Consultancy Services Ltd. reported constant currency revenue growth of 0.9% QoQ, (below our estimate of 1.9%), which includes 160 basis points+ incremental contribution from BSNL deal and thus implies muted performance in rest of business.
TCS' operating profit margin was down by 60bps QoQ at 24.1% (our estimate: 25.4%), due to higher pass-through biz.
Management. pointed out that demand environment remains cautious, and it is seeing an increase in the timeline of deal closures. Overall, it sees similar discretionary spending versus earlier quarters.
We slightly tweak our FY25/FY26E earnings per share estimates by 1.2%/0.8% considering the ongoing challenges.
Maintain ‘Reduce' rating with target price of Rs 4,240 at 26 times on FY27E (implies ~three times price-to-earnings growth).
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