Reduce TCS; target of Rs 4500: Emkay Global Financial

Emkay Global Financial recommended reduce rating on TCS with a target price of Rs 4500 in its research report dated October 11, 2024.

Broker Research

October 11, 2024 / 11:53 IST

Reduce

26 Aug, 2025 12:21

Volume

Todays L/H

Emkay Global Financial's research report on TCS

TCS’s operating performance missed expectations in Q2. Revenue grew 2.2% QoQ (1.1% CC) to USD7.67bn, in line with expectation. Although, revenue composition was weaker than expected with higher-than-estimated contribution from the BSNL deal, partly negated by softness in mature markets. EBITM declined by 60bps QoQ to 24.1% and missed expectations. Deal wins were steady at USD8.6bn (book-to-bill ~1.1x) and remained within the guided comfort range of USD7-9bn per quarter. Management highlighted some signs of demand improvement, notably in BFSI in North America; however, weak discretionary spending, client-specific challenges, slower decision-making, and client’s cautious behavior amid macro uncertainties weighed on revenue growth.

Outlook

We cut earnings estimates by 1.2-2.4% for FY25-27 considering the Q2 miss. After ~5%/13% underperformance compared to Nifty IT index over 3M/6M, TCS’s relative valuation is not demanding. Given the lack of any nearterm trigger, we retain REDUCE with TP of Rs4,500/sh at 28x Sep-25E EPS.

For all recommendations report, click here