TCS Q4 Performance: Stock Analysis and Market Outlook
TCS Share Price: Several brokerages expressed positive views on TCS after it reported better-than-expected March quarter results.
TCS stock price today: TCS shares rose nearly 2% in morning trading on Monday, April 15, despite weak market sentiment amid heightened tensions between Israel and Iran. However, IT stocks traded in the red late in the day.
During the March quarter, TCS reported revenue of ₹61,237 crore at constant exchange rates, up 2.2% year-on-year (YoY) despite continued weak demand.
Consolidated net profit for the quarter under review was Rs 12,434 crore, up 9.1% YoY and 12.4% QoQ.
In the fourth quarter, the company's operating margin increased 150 basis points year over year to 26%, and its net profit margin increased 100 basis points year over year to 20.3%.
The company also reported its highest quarterly transaction TCV of $13.2 billion (up 63% QoQ/32% YoY, with a booking-to-billing ratio of 1.8x), including one large transaction. The company maintained strong operating margin performance, with EBIT margin increasing 100 basis points quarter-over-quarter to 26.0% for the first time in the last 12 quarters.
What should investors do?
Nuvama Wealth Management slightly upgraded TCS' FY25E and FY26E earnings per share (EPS) by 1.1% and 2% respectively and maintained a Buy recommendation with a target price of Rs 4,560 against Rs 4,450 previously, valuing the stock at 27 times FY26. PE (Price Earnings Ratio).
Nuvama observed that TCS' revenue was in line in the fourth quarter of FY24 while its margin and revenue performance beat expectations.
“We maintain that the third quarter of 2024 was the bottom of the revenue downgrade cycle for the sector and expect the strong trading wins of the past few quarters to gradually translate into earnings in the coming quarters, even as the US macro improves. We believe TCS is the perfect large-cap proxy to carry out this upcycle through strong deal-making and solid margin performance,” Nuvama said.
Global brokerage JPMorgan upgraded the stock to overweight rating and raised its price target to Rs 4,500, saying the earnings had a positive impact on margins. TCS said it is likely to outperform its peers in FY25 with record-high deal closings and 1.5x TTM bookings.
Goldman Sachs, which has set a buy rating on TCS and a target price of ₹4,350, sees strong potential for double-digit revenue growth in FY25. Jefferies has set a target price of Rs 4,030, while Morgan Stanley has overweight TCS with a target price of Rs 4,350.
Brokerage firm Motilal Oswal Financial Services also maintained a Buy rating on the stock with a target price of Rs 4,600.
“Given its scale, order book, long-term orders and exposure to its portfolio, TCS is well positioned to withstand the weakening macro environment and deliver expected industry growth. Thanks to its solid market leadership position and best-in-class execution, the company has been able to maintain industry-leading margins and demonstrate superior returns,” said Motilal Oswal.
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