In today’s briefing:
- Tata Consultancy Services: Deal Lift-Off, Strong Execution
- Tata Consultancy Services: Revenue in Line and Margin Better than Expected
- TCS: Strong Demand Outlook to Compensate for Margin Headwind
- Tata Consultancy Services: Tailwinds to Be Back Ended
Tata Consultancy Services: Deal Lift-Off, Strong Execution
- TCS’ performance highlight was its strong deal bookings of USD 11.3bn, supported by mega deals of ~USD 1.8bn TCV (~0.5/0.8% revenue impact for FY23/24E)
- Medium term drivers such as prioritization of tech budgets, strong execution framework (including high retention) and services breadth including industry platforms remain intact.
- Our target price of INR 4,210 is based on 32x FY24E EPS with EPS CAGR at 12% over FY22-24E and we maintain ADD on TCS
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Tata Consultancy Services: Revenue in Line and Margin Better than Expected
- TCS delivered US$6,696mn in revenue in 4QFY22, broadly in line with our estimate of US$6,725m although EBIT margin at 25% came in 50bps above our estimate.
- The margin beat was largely due to higher-than-expected operating efficiencies (though no details were given, we believe it is because of pyramid reshaping, automation and possibly higher offshoring).
- TCS indicated strong demand on the back of highest-ever order inflow of US$11.3bn, which included two mega deals (~US$1bn each)…(continued).
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TCS: Strong Demand Outlook to Compensate for Margin Headwind
- TCS reported a revenue of USD6.7b in 4QFY22, up 3.2%/2.6% QoQ in constant currency (CC)/USD terms, but slightly below our estimate of 3.1% QoQ growth.
- Revenue in 4QFY22 was driven by Retail and Manufacturing, while regional markets and others remained weak.
- EBIT margin was flat QoQ at 25% in 4QFY22 (in line).
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Tata Consultancy Services: Tailwinds to Be Back Ended
- Tata Consultancy Services (TCS) reported revenue growth of 2.6% QoQ USD terms (3.2%QoQ CC) and margins of 25% in line with our estimates.
- Revenue growth was broad-based across verticals with communications, BFSI and retail leading the growth.
- TCV was strong at US$11.3bn (all-time high) growing 49% QoQ and 23% YoY- partly aided by two mega-deals of ~US$1 bn each.
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