Reduce TCS; target of Rs 3900: Emkay Global Financial

Emkay Global Financial recommended reduce rating on TCS with a target price of Rs 3900 in its research report dated January 12, 2024.

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January 12, 2024 / 13:09 IST

reduce

26 Aug, 2025 12:21

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Emkay Global Financial's research report on TCS

TCS’s Q3 operating performance beat estimates – Revenue grew 1% QoQ (1.1% in CC terms) to USD7.28bn, slightly higher than our estimate of 0.8% QoQ CC growth. While the revenue growth was aided by ramp-up of the BSNL deal in Q3, it was partly offset by persistent weakness in discretionary spending and reprioritization of client spends. Adj. EBITM expanded by 70bps QoQ to 25% vs our estimate of 24.7%, aided by operating efficiencies, lower sub-contractor expenses and currency depreciation. Deal intake moderated a bit sequentially, albeit remaining healthy with TCV of USD8.1bn; book-to-bill stood at 1.1x. Deal wins were broad-based and dominated by cost optimization programs. Management remains watchful in the near term given macro uncertainties, and refrained from providing any timeline of recovery; but it expects acceleration in revenue growth once macro uncertainties recede.

Outlook

We cut FY24-26E EPS by less than 1.5%, factoring in the Q3 performance and EPIC legal case settlement. We maintain REDUCE with unchanged TP of Rs3,900/share, at 25x Dec-25E EPS.

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