KR Choksey's research report on Tata Consultancy Services
TCS's Q2FY25 revenue aligned with our estimates, but earnings fell short of expectations. Revenue grew to INR 642,590 Mn (+7.7% YoY/+2.6%QoQ), driven by strong performance in the India, Asia-Pacific, and Europe regions. EBIT came in at INR 154,650 Mn (+6.8% YoY / +0.1% QoQ), broadly aligned with our estimates (-1.7%); EBIT margin contracted by 20bps YoY (- 63bps QoQ) to 24.1%, on account of higher third-party expenses due to large transformational project • PAT stood at INR 119,550 Mn (+5.1% YoY, -1.2% QoQ), missing our estimates by 2.8%; PAT margin stood at 18.6% reflecting a compression of 73bps YoY (-46bps QoQ).
Outlook
We reaffirm our FY26E EPS of INR 158.2 and P/E multiple of 29.0x, reflecting our confidence in TCS's capacity to achieve robust revenue growth, supported by expectations of increased discretionary spending resulting from interest rate cuts. Consequently, we uphold our Target Price (TP) of INR 4,587 and retain the “ACCUMULATE” rating.
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