Motilal Oswal's research report on Tata Consultancy Services
TCS reported revenue of USD7.20b in 4QFY23, up ~0.6% QoQ in constant currency (CC) terms and 30bp below our estimates. Revenue growth was affected by a slowdown in the BFSI vertical in the second half of the quarter. TCS indicated a demand slowdown in key verticals, primarily in discretionary spends, while cost efficiency spends remained robust. Q4 deal TCV was strong at USD10.0b (up 28% QoQ, book-to-bill ratio at 1.4x), bringing FY23 TCV to USD34.1b (flat YoY) despite a muted macro environment. Q4 EBIT margin was flat at 24.5% (v/s our est. of 30bp QoQ increase), impacted by a pause in few discretionary projects in Mar’23, along with higher onsite employee costs, partially compensated by lower subcontractor expenses.
Outlook
We have largely maintained our FY24/FY25 EPS estimates. Over FY23-25, we expect a USD revenue CAGR of 10.7% and an INR EPS CAGR of 15.7%. Our TP of INR3,860 implies 25x FY25E EPS (19% upside). We reiterate our BUY rating on the stock.
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