Tata Consultancy Services Ltd (TCS) is all set to kick off the earnings season on Friday, January 9. Along with its quarterly results, the board of the largest domestic IT services exporter would consider the third interim dividend for FY25. If declared, the said dividend would be paid to the eligible shareholders, whose names appear in the records of the depositories as beneficial owners as on the record date Friday, January 17.
Analysts are largely expecting a flattish constant currency (CC) revenue growth and a fall in dollar revenue growth sequentially for TCS. This would be due to lower BSNL revenue contribution and a seasonal weakness on account of furloughs. However, the numbers will likely partially be offset by a reversal of exceptional items of last quarters. Margin is seen expanding 20-40 basis points, driven by operating efficiencies.
Analysts said BSNL should contribute 3 per cent to revenue growth YoY. They see Q3 deal wins in the $9-10 billion range.
JM Financial expects TCS to report 1.4 per cent year-on-year (YoY) rise in net profit at Rs 12,178.50 crore compared with Rs 12,016 crore in the same quarter last year. Revenue is seen rising 5.9 per cent YoY to Rs 64,138 crore from Rs 60,583 crore YoY. Dollar revenue is seen at $7,596 million, down 0.3 per cent sequentially or up 4.6 per cent. Sales growth in CC terms is seen flattish, as BSNL turns into a headwind now. Ebit margin is seen at 24.3 per cent in Q3 against 24.1 per cent in Q2 and 25 per cent in the Q3FY24.
Lower revenues from low-margin BSNL deal and operational efficiency is seen driving this sequential margin expansion.
Elara Securities expects dollar revenue for TCS to decline 0.8 per cent QoQ, hit by furloughs and ebbing revenue from the BSNL deal. TCS, with wage hike already given in Q1FY25, may see a margin expansion of 40bps QoQ due to deceleration in BSNL deal-related costs, which hit Q2 margins, it said.
"We prefer TCS within large-caps as valuations are comforting," it said while suggesting a target of Rs 4,680 on the stock. This brokerage sees adjusted net profit at Rs 12,180 crore and sales at Rs 60,583 crore.
Bernstein has outperform rating on TCS and a target price of Rs 4,820 on the stock. Calling TCS a margin champion, Bernstein said the IT major's deal wins are healthy and that it has best-in-class execution capabilities and industry domain knowledge. HDFC Securities has ‘Add’ rating on TCS with a target price of Rs 4,545.
Nuvama sees TCS PAT at Rs 12,390 crore and sales at Rs 64,129 crore. "We expect TCS to deliver 0.1 per cent QoQ CC revenue growth and 0.8 per cent QoQ dollar revenue degrowth due to lower BSNL revenue and furloughs, likely to be partially offset by a reversal of exceptional items of last quarters. Margin would expand 20 bps QoQ driven by operating efficiencies. We expect deal-wins to be stable. Watch out for the outlook on the BSNL deal and margin levels thereof," it said.