Anand Rathi's research report on Tata Consultancy Services
Tata Consultancy Services Limited (TCS) recorded revenue of Rs. 64,259 Crore, a growth of 7.6% YoY. The company recorded constant currency revenue growth of 5.5% in Q2 FY25. The EBIDTA and PAT for the current quarter was Rs. 16,731 Crores and Rs. 11,955 Crores respectively as compared Rs. 15,746 Crores and Rs. 11,380 Crores in the same quarter previous year an increase of 6.2% and 5.0% YoY basis, respectively. EBIDTAM and PATM in current quarter are 26.0% and 18.6% slightly down from 26.3% and 19.3% in same quarter last year. All the Growth Markets march above company average growth wherein major contribution was from India (+95.2%) which doubled to 8.9% from 4.9% in same quarter last year, Middle East & Africa (+7.9%), Asia Pacific (+7.5%), Latin America (+6.8%). In the Americas, North America saw a decline of 2.1%, while Latin America grew by 6.8% in Q2 FY25, based on year-over-year constant currency growth. Vertical-wise Revenue Break-up: Energy, Manufacturing and Life Science & Healthcare grew by 7.0%, 5.3% and 0.1% respectively. However, Communication & Media, and Tech grew by (10.3%) and (1.9%) YoY-CC, respectively. Notably, BFSI vertical witnessed sequential improvement of 0.1%. The company's workforce strength in Q2 FY25 is 612,724, with a net headcount addition of 5,726 in the second quarter. They maintain a diverse and inclusive workplace, with 35.5% women in the workforce and representation from 150 different nationalities. The attrition rate stands slightly up 20bps at 12.3%. The company’s deal pipeline remains near an all time high, new deal TCV (Total Contract Value) wins stood at US$8.6bn, in line with the guided range of US$7-9bn. Notably, the deal pipeline remains strong. The management remains optimistic on Cloud, cyber security, vendor consolidation, GenAI and outsourcing opportunities from long-term perspectives, which was supported by strong TCV pipeline.
Outlook
The company reported muted Q2 numbers except slight momentum in BFSI segment and steady deal intake. Though management is optimistic and see recovery in Q4 led by gradual easing of inflation and interest rates, and a good holiday season. Therefore we recommend HOLD rating on the stock with an unchanged target price of ₹4,432 per share.
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