By Mr. Mitul Shah - Head of Research at Reliance Securities.
# TCS reported subdued performance in 3QFY23 with EBIT margin coming in at 24.5%, 38bps below our estimate of 24.9% while its PAT was below our estimate by 3.7%.*
# Revenue grew by 3% QoQ/8% YoY in USD terms to US$7,075mn, vs. our estimate of US$7,003mn. Revenue growth in CC terms stood at 13.5% YoY and 2% QoQ as against our estimate of 1.4%.
# EBIT grew by 8% QoQ (up 17% YoY) to Rs143bn while EBIT margin stood at 24.5% (up 52bps QoQ /down 50bps YoY), 38bps below our estimate of 24.9%.
# Its net income stood at Rs109bn (up 4% QoQ/ up 11% YoY), while adjusted margin came in at 18.6% vs. our estimate of 19.6%, due to lower other income, which fell sharply by 57% YoY and 46% QoQ to Rs5.2bn.
# LTM attrition in IT services stood at 21.3% compared to 21.5% in 2QFY23.
# Order book stood at US$7.8bn in 2QFY23 as against US$8.1bn in 2QFY23.
Our View: We believe that IT Services would not remain immune to worsening global macros in terms of rising inflation, economic slowdown, currency headwinds and likely cut on spending. Revenue growth would taper down to high single digit to low double digit in FY24E, while QoQ decline in order book, net employee reduction, elevated attrition and lower pricing power ahead would lead to valuation multiple contraction close to its historical averages. We have SELL rating on TCS.
Shares of Tata Consultancy Services Limited was last trading in BSE at Rs. 3319.70 as compared to the previous close of Rs. 3212.00. The total number of shares traded during the day was 169062 in over 18323 trades.
The stock hit an intraday high of Rs. 3327.80 and intraday low of 3215.30. The net turnover during the day was Rs. 558384907.00. |
