The share price of TCS gained over 3% to intra-day high as India’s largest IT services company reported an 8.7% year-on-year (YoY) increase in consolidated net profit, reaching Rs 12,040 crore for the first quarter ending June 30, 2024. The share price of TCS gains 2.99% to intraday high of Rs 4,044.90 on NSE
TCS Q1FY25 Update
IT bellwether Tata Consultancy Services (TCS) reported a 9% year-on-year growth in its net profit for the June quarter, reaching Rs 12,040 crore. This is an increase from the Rs 11,120 crore profit reported in the same quarter of the previous financial year. The consolidated profit for the period stood slightly higher at Rs 12,105 crore.
The company’s revenue from operations rose to Rs 62,613 crore, marking a 5.4% increase over the Rs 59,381 crore posted in the corresponding period last year. Despite the annual growth, the profit after tax (PAT) was down by over 3% sequentially, compared to the Rs 12,502 crore reported in Q4FY24.
TCS achieved a consolidated operating margin of 24.7% for the reported quarter, reflecting a 1.5% year-on-year expansion. The net margin stood at 19.2%. Notably, the profit exceeded the Street estimate of Rs 11,900 crore.
Additionally, the company’s board has recommended a dividend of Rs 10 per share.
Brokerages on TCS
Jefferies On TCS
In a recent report on Tata Consultancy Services (TCS), Jefferies upgraded the stock to “buy” from “hold” and raised the target price to Rs 4,615 from Rs 4,030. Jefferies noted that TCS’s Q1 results exceeded estimates and highlighted the return to growth in its key verticals and markets.
The report also pointed out that net hiring at TCS has reached a seven-quarter high, indicating emerging signs of revival. Jefferies also emphasized that TCS offers value relative to the Nifty, as its current PE premium is below the five-year average.
JP Morgan On TCS
JP Morgan maintained its “overweight” rating on the stock and increased the target price to Rs 4,600 from Rs 4,500. The report highlighted a clean beat in Q1 revenue, with margins in line with expectations.
Despite lagging demand, JP Morgan noted a rise in momentum, which is a cause for cautious optimism. JP Morgan observed that while the demand environment remains steady, momentum is picking up.
The report also mentioned that TCS has margin levers in place that could lead to expansion in the near future.
CLSA on TCS
In its latest report on Tata Consultancy Services (TCS), CLSA maintained a “hold” rating and raised the target price to Rs 4,007 from Rs 3,990. CLSA highlighted broad-based revenue growth across various industry verticals, with BSNL playing a crucial role.
The report noted that TCS’s margins were slightly ahead of both their own and consensus estimates. While the AI pipeline under CEO Krishnan Ramanujam is growing, CLSA mentioned that it is still not significant enough to impact the company’s financials substantially.
Nuvama on TCS
In its latest report on TCS, Nuvama maintained a “buy” rating with a target price of Rs 4,800. Nuvama noted that TCS’s Q1 results indicate a solid start to a turnaround year.
The report asserted that the earnings downgrade cycle for the sector is behind us and expects that the strong deal wins from the last few quarters will gradually convert into revenue in the upcoming quarters. Nuvama highlighted TCS as a perfect large-cap proxy to play this upcycle.
UBS on TCS
UBS maintained a “buy” rating with a target price of Rs 4,600. UBS highlighted a strong Q1 performance, noting an employee recovery and a stable demand environment with lower client scrutiny on ongoing projects.
The report emphasized that the company’s AI deal pipeline has grown to $1.2 billion, up from $900 million in Q4FY24, which is a significant development. UBS pointed out several small but positive aspects in the results, suggesting that another quarter of outperformance could lead to a rerating for TCS.
Motilal Oswal On TCS
Motilal Oswal Financial Services reiterated its buy recommendation on Tata Consultancy Services (TCS), setting a target price of Rs 4,660. This target implies a valuation of 30 times FY26E EPS and suggests a potential upside of 20%.
According to Motilal Oswal, TCS is well positioned to navigate through the current lukewarm macro environment due to its size, robust order book, and exposure to long-duration orders and portfolio.
The brokerage firm highlighted TCS’s strong market leadership and exemplary execution, which have enabled the company to maintain industry-leading margins and demonstrate superior return ratios.
“Given its steadfast market leadership position and best-in-class execution, the company has maintained its industry-leading margin and demonstrated superior return ratios,” Motilal Oswal stated.
TCS Stock Performance in Last One Year
In terms of stock performance, TCS shares have demonstrated positive returns across multiple time frames. Over the past month, the stock has given a commendable 5.69% return, showcasing its stability and growth potential. The last six months have seen even more impressive results, with a substantial increase of 4.21%, indicating a strong upward trend.
Year-to-date, TCS shares have surged by 6.16%, reinforcing the stock’s positive momentum in the current fiscal year. Looking at the broader picture, the stock has delivered an impressive return of over 24.12% in the last twelve months, emphasizing its sustained growth and attractiveness to investors.
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