The I T shares have been consistently performing well even when the markets were down during pandemic period. And amongst them TCS has been the investors darling for long. The 4th Q results of TCS amplifies it. Read this story on TCS.
Tata Consultancy Services (TCS) opened the fourth-quarter earnings season with earning a net profit of ₹9,926 crore, growth of over 7% year-on-year (YoY). India’s top IT company’s revenue jumped nearly 16% to ₹50,591 crore during Q4FY22. Shares of TCS rose in Tuesday’s opening deals to ₹3,722 apiece.
IT Services has entered into a technology upcycle, with Cloud migration and digital transformation-led deals coming into the market. Given TCS’ size, capabilities, and portfolio stretch, it is rightly positioned to leverage anticipated industry growth, highlighted domestic brokerage Motilal Oswal.
“TCS has consistently maintained its market leadership position and shown best in-class execution. This renders the company with ample room to maintain its industry-leading margin and demonstrate superior return ratios,” the note stated. Brokerages maintain its positive stance on TCS, given its strong growth outlook. It has maintained its Buy rating on the IT stock with target price of ₹4,240.
The dollar revenue grew 14.3% in constant currency from a year earlier to $6.7 billion on the back of highest-ever order book worth a total contract value (TCV) of $11.3 billion. It reported its highest-ever incremental revenue addition of $3.5 billion and TCV of $34.6 billion for FY22.
Analysts at global brokerage Jefferies said that TCS’ premium valuation over Infosys, despite slower growth, may limit upside. They have maintained Hold rating on TCS shares with revised price target of ₹3,925.
Steady margins, despite strong headcount additions and a rise in subcontracting costs, surprised positively. The margin and profit beat stemmed mainly from higher than expected revenues, Jefferies’ note highlighted.
“While margins in FY23 are likely to contract, we expect improvement in utilization and normalization of subcontracting costs to keep margins around the 25% levels over FY23-24 despite normalization of travel costs,” it added.
Another brokerage ICICI Securities has reiterated its HOLD rating on account of slowing earning growth and elevated PEG ratios with a price target of ₹3,519.
“TCS has better-than-peers’ supply-side management, breadth of capabilities and deep domain capabilities, but the stock is trading at 28.3x on FY24EPS with PEG of 2.4x – this leaves limited room for upside,” as per ICICI Securities.
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