TCS bounces 3.5% off lows ahead of September quarter results today

Shares of Tata Consultancy Services (TCS) were up 2 per cent to Rs 3,118.90 on the BSE in Monday's intra-day trade, in an otherwise a weak market, ahead of its financial results for the quarter ended September 2022 (Q2FY23) due later today. The stock of the information technology (IT) major bounced back 3.5 per cent from its intra-day low of Rs 3,013. At 01:43 PM, it was trading 1.7 per cent higher at Rs 3,115.70, as compared to 0.43 per cent decline in the S&P BSE Sensex.

That said, TCS has underperformed the market in the recent past, with the stock down 5 per cent in the past three months, as against 6 per cent rally in the S&P BSE Sensex. Further, in the past six months, and one year, the stock has slipped 16 per cent, and 21 per cent, respectively. In comparison, the benchmark index was down 3 per cent, and 4 per cent, respectively, during the same period. TCS had hit a 52-week low of Rs 2,926 on September 26, 2022.

Most IT stocks have corrected owing to potential recession in developed markets, growth moderation, and margin pressure. Analysts at Emkay Global Financial Services believe the slowdown in demand is priced in valuation, although recession has not been captured fully.

"We expect the deal intake to remain steady across companies in Q2, with flattish growth. Management commentary on the deal pipeline, the decision-making cycle, re-prioritization of spending, pockets of weakness, and deal closures should be important to gauge confidence on growth continuity and better predictability. The deteriorating macro situation is likely to drive vendor consolidation and cost takeout deals which may drive volatility in TCV in coming quarters," the brokerage firm said in IT sector Q2FY23 preview.

Meanwhile, analysts expect TCS to post a sequential revenue growth of 3-4.6 per cent in constant currency terms, while its net profit may rise in the range of 6-10.7 per cent from the last quarter.

As per an average of five estimates compiled by Business Standard, the IT giant is expected to post a net profit of Rs 10,149 crore on a topline of Rs 53,552 crore in Q2FY23. On a yearly basis, the revenue could rise by 17-18 per cent and net profit by 4.4-9 per cent.

The company’s EBIT margins, on the other hand, are likely to improve by 40-118 basis points on a quarterly basis due to improved pricing, operating leverage and absorption of earlier wage hikes. CLICK HERE FOR FULL REPORT