TCS Q3: A moderation of subcontract cost is likely to result in margin expansions to the tune of 28 bps, said Axis Securities. Motilal Oswal sees Ebit margin at 24.5 per cent. 
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TCS Q3: A moderation of subcontract cost is likely to result in margin expansions to the tune of 28 bps, said Axis Securities. Motilal Oswal sees Ebit margin at 24.5 per cent. Tata Consultancy Services Ltd (TCS) is all set to disclose its December quarter results post market hours of Thursday, alongside Infosys Ltd. The largest IT major is expected to report 7-11 year-on-year (YoY) rise in profit on a 1-4 per cent rise in sales in a seasonally weak quarter.
Ebit margin is seen improving sequentially on account of pyramid restructuring, higher offshoring, higher utilisation and efficiencies in discretionary expenses. Deal wins for the K. Krithivasan-led company may cool off a bit, analysts said.
Nirmal Bang expects TCS to report flat revenue growth sequentially on constant currency basis, led by strong order inflow of the last three quarters. This brokerage expects TCS to face higher than normal furloughs due to its large exposure to the BFSI sector and, therefore, cross-currency headwind of 75 basis points sequentially.
TCS had reported a total contract value of $11.2 billion, after clocking TCV of $10.2 billion in Q1FY24, which was above the guided range of $7-9 billion.
"After three successive quarters of $10 billion or above TCV, we believe 3QFY24 TCV will cool off to a possible sub-$10bn number," it said while expecting profit for TCS to rise 7.8 per cent YoY to Rs 11,691.70 crore on 2.4 per cent YoY rise in sales at Rs 59,608 crore.
On a sequential basis, Axis Securities expects TCS to report a sequential revenue growth of 1.5 per cent. A moderation of subcontract cost is likely to result in margin expansions to the tune of 28 bps, it said. This brokerage pegs deal wins in the We expect deal wins in the $6-$8 billion range. It is profit at Rs 11,565 crore, up 10.9 per cent. Revenue for the quarter rose 4 per cent YoY to Rs 60,570 crore.
YES Securities sees profit to rise 7.1 per cent YoY to Rs 11,620 crore on 3.1 per cent YoY rise in sales at Rs 60,323 crore.
Motilal Oswal, which sees profit rising 7 per cent for the quarter, expects Ebit margin to come in at 24.5 per cent. Outlook on near-term demand environment, BFSI, and deal wins are the key monitorables, it said.
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