TCS share price: On Thursday, July 11, before the IT giant’s April-June quarter earnings, TCS share price increased by around 2% during early trading on the BSE. In contrast to its previous closing of ₹3909.90, the TCS share price opened at ₹3944.65 and quickly increased 1.8% to ₹3,979.90.
TCS shares were up 1.51 percent at ₹3969.05. This was about 9:30 a.m. At that point, the Sensex had increased by 0.13 percent to 80,030.
With respect to the Sensex stock benchmark, which has increased by approximately 22% over the past year, TCS’s share price has increased by roughly 20% as of the July 10 close.
Due to rising salary costs, the majority of brokerage firms anticipate that TCS will record a quarter-over-quarter (QoQ) decline in operating margin. It’s possible that revenue figures may expand slowly, and some analysts predict a sequential decline in profit after taxes (PAT).
In addition to the numbers, deal pipelines, attrition rates, the performance of important verticals, and the prospect for near-term demand will be the main points of interest.
Let us examine the expectations of five leading brokerage firms based on TCS’s Q1FY25 scorecard:
Motilal Oswal Financial Services
Brokerage company Motilal Oswal Financial Services anticipates that TCS would report 1.6% QoQ growth in CC (constant currency), driven by deal scale-up, which includes the BSNL deal that is proceeding according to plan.
PAT might decrease 2.9% QoQ but increase 9.2% YoY, according to Motilal.
The brokerage firm expects that salary increases in Q1FY25 will cause the EBIT margin to shrink by 150 basis points on a quarterly basis.
“There should be a healthy deal pipeline. Key monitorables include the outlook for the near-term demand and pricing environment, BFSI, and transaction wins, according to Motilal.
Kotak Institutional Equities
According to Kotak, TCS’s revenue growth will be fueled by the expansion of its robust order signings from previous quarters. The brokerage company anticipates weak telecom and financial services revenue.
The brokerage firm predicts that a reduction in utilisation rates and wage revision will cause the EBIT margin to decrease by 140 basis points on a quarterly basis.
“In FY25E, attention will be on TCS’s capacity to capitalize on its advantages in “Run” expenditures and surpass revenue growth targets. Mega transactions that TCS has secured might help the company expand by around 2.5% in FY25E, according to Kotak.
Kotak stated that investor attention will likely center on several key areas: (1) the prospects within the financial services sector and any potential market share loss due to insourcing by major clients, (2) the spending trends in the affected North American market, specifically within financial services, high-tech, and telecom sectors, (3) the current deal pipeline, (4) the status of discretionary spending and the necessary conditions for its revival, (5) the effect of Global Capability Center (GCC) expansion on company growth, and (6) strategies to maintain and enhance profit margins.
Nuvama Institutional Equities
A rebound in the BFSI and ongoing strength in manufacturing are expected to propel TCS to produce 14% QoQ CC revenue growth and 1.1% QoQ USD growth, according to Nuvama.
“The wage increase will cause the margin to decline by almost 140 basis points on a quarterly basis.” The dealwins run is anticipated to continue. We will be closely monitoring any commentary on client spending and discretionary spending, stated Nuvama.
JM Financial
JM Financial projects a 30-bps cross-currency headwind and 1.4% CC revenue growth, which translates into 1.1% QoQ USD revenue growth.
“TCS’s main source of profit headwind is wage growth. However, we anticipate that operational efficiencies—such as utilization and pyramid—will partially offset this impact. A one-time fine (up to $194 million) resulting from a negative ruling rendered by a US district court may have an effect on reported profits, according to the brokerage company.
ICICI Financial
The brokerage company anticipates that TCS will report QoQ revenue increase of 1.7% in USD and 1.8% in CC, driven by impetus in BFSI, retail (consumer business group), and hi-tech from the transactions announced in Q1.
Higher staff costs—a pay increase that takes effect on April 1, 2024, and a double-digit increase for high performers—are expected to cause the EBIT margin to fall by 186bps QoQ.
ICICI expressed anticipation for management’s insights into several areas: (1) corporate discretionary spending, (2) reduced deal announcements in the first quarter of FY25, (3) campus recruitment, (4) major contract signings, and (5) improvements in the Banking, Financial Services, and Insurance (BFSI) sector.
Also Read | Better than anticipated, Bansal Wire shares debut on the NSE at a premium of 39%
(Disclaimer: The opinions and suggestions mentioned are from individual analysts, experts, and broking firms, not endorsed by Businessuncover. Investors should consult certified experts before deciding on investments.)
