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TCS after Q4 earnings | What should investors do: buy, sell or hold the stock?

The consolidated revenue stood at Rs 50,591 crore, up 16 percent from the year-ago quarter, while it has increased by 3 percent on a quarterly basis.

April 12, 2022 / 03:56 PM IST

Tata Consultancy Services share price dipped marginally in early trade on April 12 - a day after the company posted its fourth quarter earnings with a record-high order book.

TCS on April 11 reported a consolidated net profit of Rs 9,926 crore for the fourth quarter ended March 2022, registering a 7 percent on-year growth. On a sequential basis, the growth in profit was 2 percent.

The consolidated profit after tax (PAT) stood at Rs 9,246 crore a year ago, while it was Rs 9,769 crore in the December quarter.

Its consolidated revenue scaled 16 percent to Rs 50,591 crore from the year-ago quarter, while it grew 3 percent on-quarter. In constant currency, the increase in revenue is 14.3 percent year-on-year (YoY).

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Here's what brokerages have to say about the stock and the company after the Q4 earnings:

Prabhudas Lilladher

We remain structurally positive on TCS given its (1) strong growth momentum on a high base, (2) best-in-class supply-side metrics with industry-leading margin profile, and (3) strong client mining abilities further enhanced by client-centric new organisational structure.

We cut our EPS estimates by 1.5 percent/0.8 percent for FY23/24 led by a cut in margin estimates.

We arrive at a DCF-based target price of Rs 4,221 (earlier target price of Rs 4360; implied earnings target multiple of 31x on FY24 EPS).

TCS is currently trading at 31x/27x on FY23/24 EPS of 119.6/136.6 with revenue/EPS CAGR of 12.5 percent/16.2 percent over FY22-24E.

Motilal Oswal

Given TCS’ size, capabilities, and portfolio stretch, it is rightly positioned to leverage the anticipated industry growth.

TCS has consistently maintained its market leadership position and shown best-in-class execution. This renders the company with ample room to maintain its industry-leading margin and demonstrate superior return ratios.

We maintain our positive stance on TCS, given its strong growth outlook. Our target price of Rs 4,240 implies 30x FY24E EPS, with a 15 percent upside potential. We maintain our 'buy' rating.

Sharekhan

TCS is expected to remain at forefront of participating in clients’ growth and transformation journeys, given its strong digital competencies, robust contextual understanding of clients’ operation, mature product and platform portfolio and solid execution.

Record high deal win TCVs, good client addition and broad-based growth across industries provide strong double-digit revenue growth visibility for FY2023.

We expect the company’s US Dollar revenues and earnings to clock a 12 percent/14 percent CAGR over FY2022-24. We maintain a 'buy' on TCS with an unchanged price target of Rs 4,600.

JPMorgan

Research firm has maintained neutral rating on TCS with a target at Rs 3,900 per share.

The stock outperformed Nifty IT by 9 percent YTD partly led by buyback support. The stock trades at 31x 1 year forward PE, 11/8 percent premium to Infosys/Accenture and don’t see further upside triggers.

Morgan Stanley

Morgan Stanley has kept the equal-weight rating with a target at Rs 3,900 per share.

There was a volatile macro climate but resilient demand and even with good Q4 order intake, the revenue upgrades are unlikely.

The macro conditions are trickier than they were last year and faces downside risks from ongoing supply-side challenge.

Jefferies

Brokerage house maintained hold rating with a target at Rs 3,925 per share. The stock is at a 10 percent premium to Infosys despite having 3 percent lower earnings growth.

The results were ahead of estimates, recovery in stressed verticals driving growth.

Jefferies has raised the FY23-24 estimates by 1-2 percent and expect margin around the 25 percent levels over FY23-24.

Nomura

The broking firm Nomura has kept the 'neutral' rating on the stock and raised target to Rs 3,930 from Rs 3,890 per share.

It expect EBIT margin to drop 40 bps YoY to 24.9 percent in FY23 as Q4 results modestly beat consensus on revenues.

Nomura increases FY23-24 EPS estimates by 1 percent.

CLSA

CLSA has maintained outperform call on the stock and raised target price to Rs 4,000 from RS 3,850 per share.

There was a strong hiring and orderbook, but margin volatility is an overhang.

The company has reported healthy 3.2 percent QoQ constant currency revenue growth, orderbook is 40 percent above run-rate of the past four quarters but we trim our FY23/FY24 EPS forecasts by 1.6 percent/0.4 percent, said CLSA.

However, improved revenue visibility is a near-term comfort, it added.

At 9:18am, Tata Consultancy Services was quoting at Rs 3,691.40, down Rs 5.00, or 0.14 percent on the BSE.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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first published: Apr 12, 2022 09:29 am