Tata Consultancy Services (TCS) reported bitter quarterly earnings as the company missed market expectations due to margin pressure and high attrition rate. Sequentially, TCS’ performance was sluggish, however, year-on-year growth was favourable. Now, all attention will be on how TCS shares perform on Monday after June 2022 (Q1FY23) results. TCS announced its financial performance after market hours on Friday and investors bet cautiously on the company.
on a consolidated basis, TCS recorded a net profit of 9,478 crore up from 9,008 crore in Q1FY22. Rejected by PAT 9,959 crore was seen in the March 2022 quarter. consolidated revenue jumped 52,758 crore in Q1FY23 as compared to Rs. 45,411 crore in Q1FY22 and 50,591 crore in Q4FY22. Constant currency revenue growth is at 15% yoY, as against 3.5% sequentially.
In Q1FY23The company’s net margin stood at 18%. While its operating margin declined 2.4% year-on-year to 23.1% in the quarter. Margins were impacted by annual salary hikes, higher cost of managing talent churn and gradual normalization of travel expenses.
TCS achieved an order book of $8.2 billion with excellent client metrics. In Q1FY23, TCS added 9 new customers in the over $100 million band annually, while 19 customers added in the over $50 million band.
TCS sentiment was bearish ahead of earnings on BSE. finished on stock less than 3,264.85 22.10 or 0.67%. TCS which is the second most valuable company in terms of market share and the largest IT services provider saw its valuation collapse 12 lakh crore figure. The company’s market valuation was 11,94,625.39 crore by the end of Friday’s session.
How will TCS shares react after the Q1 results:
After earnings, Santosh Meena, Head of Research, Swastika Investmart Ltd, missed expectations in TCS Q1 earnings on TCS Q1 results as margins are under pressure and job loss rate is still high. However, the counter led with weak expectations in its Q1 earnings, so no knee-jerk reaction is expected, while buying could be seen at lower levels.
“Technically, the counter is still forming a lower high and lower low where the 50-DMA of 3333 is an immediate hurdle; above this, we can expect a short-covering rally towards the 3470-3500 area. Top it up. Maintain is 3500 points for any major buy interest. On the downside, 3200 is an immediate support level, below this, it is vulnerable to fall towards 3000 points, although 3000 is a good level for fresh entry,” said Meena he said.
Mitul Shah, Head of Research Associate at Reliance Securities said, “TCS is likely to be one of the major beneficiaries of the medium-term uptrend in technology spending. We expect TCS to gain market share on the back of vendor consolidation and captive monetization efforts. However, moderation in EBIT margin and lower order book will further dampen earnings growth momentum and may result in a downward revision in the valuation multiple. We are positive on the structural IT story and on TCS being a major beneficiary of the IT up cycle Remains constructive. Positive on the stock given strong revenue growth, high EBIT margin and industry leading return ratio. We currently have a BUY rating on the stock.”