TCS Q4 net may rise to Rs 5483.6 cr: Motilal Oswal

Motilal Oswal has come out with its fourth quarter (January-March) earnings estimates for the technology sector. The brokerage house expects Tata Consultancy Services (TCS) to report a 0.7 percent growth quarter-on-quarter (growth of 3.5 percent year-on-year) in net profit at Rs 5483.6 crore.

Sales are expected to increase by 0.2 percent Q-o-Q (up 14 percent Y-o-Y) to Rs 24559.6 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 0.1 percent Q-o-Q (up 6.1 percent Y-o-Y) to Rs 7061.7 crore.

Motilal Oswal's Report on Tata Consultancy Services:

In terms of 4QFY15 performance, TCS expects revenue in constant currency to be in line with 4QFY14 (1.9 percent QoQ CC growth) performance.

TCS expects the cross currency movements to have an adverse impact of 230bp. We expect 2.7 percent QoQ growth in constant currency, and estimate reported revenue at USD 3.95b, +0.4 percent QoQ.

Gross margin is estimated to be flat at 46.1 percent and our SGA estimate is 17.3 percent, resulting in flat margins during the quarter. Adverse movements in cross currencies have been accompanied by marginal appreciation of the INR (30bp) during the quarter. Hence, there is a negative impact of 40bp on margins during the quarter. We expect that to be offset by internal efficiencies.

Our PAT estimate for the quarter is INR 54.8b, up 0.7 percent QoQ, on the back of lower forex gains (INR 2b v/s INR 2.93b in 3Q).

The stock trades at 20.1x FY16E and 16.8x FY17E earnings.

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