TCS Q2 Results To Be Out Today: Tata Consultancy Services (TCS), India’s largest IT services provider, will on Wednesday kick-start the Q2 earnings season. The company, which will announce its earnings after market hours today, is expected to post a muted growth in both revenue and profit today with a single-digit performance for the September 2023 quarter. Here’s what analysts expect and what you need to watch out for.
Update: TCS Q2 Results: Net Profit Rises 8.7% YoY To Rs 11,342 Crore, Rs 9 Interim Dividend Declared
Forecasting a single-digit growth, brokerage firm Kotak Instiutional Equities in its report said, “We forecast marginal revenue growth due to persisting weakness in discretionary spends across several verticals. CC revenue growth would moderate to 3.2 per cent on a YoY basis. We do not forecast any revenues from the BSNL deal. We see a 67 bps rise in EBIT (earnings before interest and tax) margin QoQ primarily aided by operating efficiencies.”
It said the yearly margin decline will largely be due to the slowdown in growth and increase in travel and other back-to-office costs.
Another brokerage JM Financial expects cc revenue growth of 1 per cent with a 20 bps cross currency headwinds translating into 0.8 per cent QoQ dollar revenue growth. It also expects a 55 bps expansion in EBIT margin led by lower sub-contracting expenses and better utilisation.
In the previous quarter ended June 2023, TCS reported a consolidated net profit of 16.8 per cent at Rs 11,074 crore for the June 2023 quarter. Its consolidated revenue increased nearly 13 per cent YoY to Rs 59,381 crore.
Brokerage firm Motilal Oswal Financial in its note said TCS should see meaningful margin recovery of 90 bps QoQ post wage hikes in Q1. The growth is expected to stay muted due to weak macro. “We Expect 1.1 per cent QoQ cc growth for the September 2023 quarter.”
HSBC Global expects TCS to report a 1 per cent cc growth as industry weakness is being partially offset by cost takeout and vendor consolidation activity. “We see yearly cc growth moderating to 5 per cent for the quarter. While margins will improve by 60 bps with the absence of wage hikes previously done in Q1.”
Another brokerage Axis Securities in its report expects moderated growth backed by delayed spending and slower ramp-up. It shows a 9 per cent year-on-year growth in revenues and a 10.2 per cent jump in profit after tax (PAT).
What Should Investors Watch Out For?
Apart from revenue and profit growth, the management commentary on outlook is the key thing to watch out for — including new deal ramp-up and visibility going ahead and vertical outlook such as BFSI, hitech, manufacturing, etc.
Another key thing to watch out for is TCS’ deal pipeline. Kotak Institutional Equities in its report forecasts TCV of deals wins, including BSNL deal, at $12 billion, a YoY growth of 48 per cent. TCS has not disclosed TCV from BSNL deal but this could be worth around $1.8 billion.
JM Financial said, “We expect reported deal TCV to be healthy as indicated by a few large deal wins recently.”
Motilal Oswal said the deal pipeline should remain resilient, especially in the UK regions, while the US and Europe continue to stay on a weaker trajectory.
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