TCS shares price fell nearly 2% to Rs 3,184 on Thursday after the IT giant’s net profit in the fourth quarter missed market estimates. The company's Q4FY23 net profit came in at Rs 11,392 crore, up 5% from the previous quarter.
TCS' revenue was recorded at Rs 59,162 crore in the fiscal fourth quarter, rising just about 1.6% from the previous quarter’s Rs 58,229 crore. The quarter’s operating margin was 24.5% and the net margin was 19.3%.
TCS declared a final dividend of Rs 24 per share, taking its total dividend payout for the financial year 2022-23 to Rs 107 per share.
Analysts at Nirmal Bang maintain a ‘SELL’ rating on TCS with a target price of Rs 2,638, representing 12-month forward PE of 19.3x on FY25E EPS. “We have an explicit view of a shallow recession in the US in CY23 and hence our near-term cautious view," the brokerage said.
"From a medium-term perspective, we believe that the street is overestimating industry growth by 300-400bps. We see the higher competitive intensity and a non-zero interest rate regime drag on growth. Post 4QFY23, we have modestly cut our EPS for FY24-FY26 largely on the back of lower other income following a significant dividend payout in FY23 (100%),” said analysts at Nirmal Bang.
The brokerage maintained its positive stance on TCS with a target price of Rs 3,860 which implies 25x FY25E EPS, with a 19% upside potential. It has reiterated 'BUY' rating on TCS shares as it believes that owing to its steadfast market leadership position and best-in-class execution, TCS has been able to maintain its industry-leading margin and demonstrate superior return ratios.
Given TCS’s size, order book and exposure to long-duration orders and portfolio, analysts at Motilal Oswal believe that it is well positioned to withstand the weakening macro environment and ride on the anticipated industry growth.
Choice Broking as a 'Neutral' rating on TCS shares with a revised target price of Rs 3,323. “Cognizant of the uncertainty around the macro-environment worsened by near-term recessionary risks, we have trimmed our estimates and maintain a NEUTRAL rating on Tata Consultancy Services stock," it said.
Nuvama Institutional Equities trimmed FY24/25E EPS by 1.3%/0.3%. This along with a valuation rollover to 25 times FY25E PE yields a target price of Rs 3,750 against Rs 4,100 earlier. Nomura has also cut its price target to Rs 2,830 from Rs 2,850.
JPMorgan has a target of Rs 2,700 on the TCS stock, Citi has a target of Rs 3,000, Jefferies Rs 3,375, CLSA Rs 3,550, Morgan Stanley Rs 3,350 and Bernstein at Rs 3,560 per share.
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