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Last Updated : Oct 11, 2019 10:06 AM IST | Source: Moneycontrol.com

TCS shares fall 4% on softer Q2 numbers

Jefferies has a buy call on the stock but the brokerage has cut the target price to Rs 2,300 from Rs 2,500 earlier, citing that the weak Q2 signals a single-digit growth in FY20.

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Shares of Tata Consultancy Services (TCS) fell almost 4 percent on BSE on October 11, a day after the IT heavyweight released a softer set of numbers for the July-September quarter of the financial year 2020, missing Street Estimates.

TCS reported a 1 percent sequential decline in the September quarter profit at Rs 8,042 crore, against the profit of Rs 8,131 crore in the first quarter. The growth was impacted by increased volatility in financial services and retail verticals and miss on margins front.

Brokerages have come out with mixed reviews and cut target prices after the company's uninspiring Q2 performance.

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Global brokerage firm UBS has a neutral call on TCS with a target price of Rs 2,300 and cited that the revenue miss adds evidence to demand slowdown.

Morgan Stanley has maintained an 'equal-weight' view on the stock with an unchanged target price of Rs 1,980, underscoring that the Q2 revenue growth, margin and PAT was below estimate.

Jefferies has a buy call on the stock but the brokerage has cut the target price to Rs 2,300 from Rs 2,500 earlier, citing that the weak Q2 signals a single-digit growth in FY20.

Motilal Oswal Financial Services has a neutral call on the stock with a target price of Rs 2,000.

The domestic brokerage firm has downgraded the operational earnings estimate by 2-4 percent and said that the growth performance this quarter only dampens the FY20 growth prospects further.

As per the brokerage, EBIT margin contraction of 250bp YoY is a reflection of high pressure on earnings growth. However, margins are likely to recover to an extent because of normalization of utilization.

"Demand outlook for the medium term remains healthy considering strong deal wins. We expect US dollar revenue and EPS CAGR of 7 percent and 7.5 percent, respectively, over FY19-21," said Motilal Oswal.

Shares of TCS traded 2.54 percent down at Rs 1,953.55 on BSE around 1000 hours IST.

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First Published on Oct 11, 2019 10:06 am
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