Prabhudas Lilladher's research report on Tata Consultancy Services
TCS delivered mixed set of performance during the quarter with inline constant currency growth negated by tepid margins. Revenues came at USD5250mn for Q3FY19 up 0.7% QoQ and 9.7% YoY and below our estimates (PLe: USD5283mn). Cross currency headwind for the quarter stood at 110bps. Constant currency revenue growth for the quarter stood at 1.8% inline with our estimates (Ple: 1.9%). EBIT margin for the quarter came at 25.6% down 90 bps QoQ and and below our estimates (PLe: 27.0%). Management cited that increase in subcontractor cost (+40bps) with localization of operations and supply constraint of talent has led to tepid margins during the quarter. PAT for the quarter came at Rs 81.1bn which is 2% below our estimates (Ple: 83.1bn) led by margins miss. NPM stood at 21.7% up 30bps QoQ/60bps YoY led by higher other income.
Outlook
TCS trades at 19.5x FY20E EPS and 18.6x Sep20E EPS. We trim our TP by 1.1% at 23x Sep20E EPS to Rs2275 (Earlier Rs2300/sh) Retain Accumulate.
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