TCS Q4 results on April 12: Will this IT major perform better than Infosys, HCL Technologies, Wipro and Tech Mahindra?

Tata Consultancy Services (TCS), whose shares have performed better than peers Infosys and Wipro in 2023 so far, is set to announce its March quarter results on Wednesday. Analysts largely expect the Tata group firm, whose CEO Rajesh Gopinathan resigned in March, to report over $8.5 billion in deal wins, supported by Phoenix, Telefonica and Bombardier deals. They estimate profit growth for the IT major in double digits, which would be the highest in the tier I space. TCS’ revenue growth in constant currency (CC) is likely to be the highest among peers on a sequential basis while its Ebit margins, pegged at 25 per cent, would also be the best among peers, analyst estimates suggest.

"TCS will likely lead Tier 1 IT on growth in Q4FY23. Growth will likely be led by spending on cloud and digital programs, cost take-outs and wallet share/vendor consolidation gains. Exposure to impacted banking clients will not materially impact revenue growth in the quarter, in our view," said Kotak Institutional Equities.

CC revenue growth

In terms of revenue growth in CC terms, Nuvama Institutional Equities expects TCS to log 1.4 per cent sequential growth, which would be highest among its peers. The same brokerage expects Infosys to report 0.2 per cent growth, Wipro to log a 0.2 per cent de-growth, HCL Technologies to announce a 1.6 per cent de-growth and Tech Mahindra to declare a 0.6 per cent de-growth in CC revenues on a sequential basis.

Profit growth

TCS is expected to report double digit growth in profit. Nirmal Bang Institutional Equities sees profit for TCS to rise 14.6 per cent YoY to Rs 11,200 crore against a 12.7 per cent growth for Infosys, 9.3 per cent growth for HCL Tech and flat growth for Wipro. HDFC Institutional Equities sees profit for the IT major at Rs 11,227 crore. Nuvama sees profit for TCS jumping 18.6 per cent YoY to Rs 11,769 crore. This brokerage sees profit for Infosys rising 17 per cent YoY, Wipro 3.5 per cent YoY, HCL Technologies (5.9 per cent YoY) and TechM (down 18 per cent).

Ebit margin

TCS may report an Ebit margin of 25 per cent, up 50 basis points sequentially. This is against 11.9-21.3 per cent Ebit margins for IT peers. Kotak Institutional Equities sees Ebit margin for Wipro IT at 16.2 per cent, Infosys at 21.3 per cent, HCL Technologies at 18.2 per cent and Tech Mahindra at 11.9 per cent. Nuvama expects Infosys to report margin at 21.4 per cent, HCL Technologies at 18.4 per cent, at Wipro 16.3 per cent and Tech Mahindra at 11.5 per cent.

Deal wins

HDFC Institutional Equities sees deal wins for TCS at $8.5 billion. Kotak Institutional Equities sees strong deal wins of $10 billion-plus for TCS, assuming normal renewal component. It did not include TCV from mega deal with BSNL that is likely to be signed with TCS. Kotak Institutional sees TCV in excess of $10 billion.

Commentary, guidance

In the case of TCS, Nuvama sees strong deal-wins, cautious commentary and update on client spending for CY23 in uncertain macro environment. HCL Tech is seen guiding for 5-7 per cent CC YoY growth in IT Services for FY24. For Infosys, steady deal-wins and a conservative commentary on demand environment are likely. The IT major is expected to guide for 6-8 per cent CC YoY growth in FY24. In the case of Wipro, the IT firm company is expected to give minus 1 per cent to 1 per cent CC QoQ revenue growth guidance for Q1FY24.

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