Tata Consultancy Services Ltd (TCS) reported June quarter results that managed to beat analyst estimates, albiet marginally. A couple of analysts are positive on the stock post the Q1 results.
Manish Chowdhury, Head of Research at StoxBox said TCS’ Q1FY25 results were a mild surprise on the upside as sequential constant currency (CC) revenue growth of 2.2 per cent reflected an improving business environment in the US.
Large deals made in the last year seem to be getting converted into revenue along with the ramp-up of the BSNL deal, he said adding that that the lowering attrition and the net headcount addition is a major positive and augurs well for the company’s utilization levels and subsequently its EBIT margin.
"Despite wage hikes in the quarter TCS managed to report a beat on EBIT margin estimates. These positives are bound to lead to an upward revision in EPS estimates but not so much on the revenue side. Key monitorables going forward are 1) updates on the BSNL deal ramp-up; 2) medium-term industry demand trends and impact of macro headwinds on demand; 3) deal wins and deal pipeline; 4) revenue growth and margin outlook for FY25; 5) investments in GenAI partnerships," Chowdhury said.
Prashanth Tapse, Senior VP (Research) at Mehta Equities said the profit stood at Rs 12,040 crore against a Bloomberg consensus of Rs 11,959 crore. Revenue at Rs 62,610 crore was also higher against an estimate of Rs 62,128 crore. All major markets and verticals have returned with sequential growth.
Overall the frontline numbers look like the worst is behind us and we may see revival in the IT sector from Q1 earnings, Tapse said.
"Technically TCS is trading significantly above its anchor VWAP support mark of Rs 3,900 on its daily time frame chart. With the stock making higher highs and remaining well above its immediate support level, it appears poised to reach the Rs 4,030 and Rs 4,050 levels. The RSI (14) around 51 indicates potential momentum in the upcoming sessions. We advise traders to maintain a strict stop loss at Rs 3,875, aiming for potential targets of Rs 4,030 and Rs 4,050.”