Shares of Tata Consultancy Services jumped 4.4% to Rs 3,899.95 a day after the company reported its third-quarter results for FY 24. The company posted a net profit of Rs 11,058 crore, a jump of 2%, against Rs 10,846 crore.
Here’s brokerages’ view on Tata Consultancy Services
BNP Paribas India
According to the brokerage house despite the BSNL deal ramp-up, operating margin continued to see a swift recovery, beating the consensus and the brokerage’s expectations. The brokerage is on the view that the company was able to drive margin expansion through better realization, productivity, and lower sub-contracting costs.
The brokerage said this quarter the company saw a steady deal total contract value of $8.1 billion as earlier the company saw multiple mega and large deals last quarter.
The brokerage is optimistic about the company’s stance on a demand recovery as it sees pent-up demand for tech spending on new technologies and expects BFSI to recover in the coming quarter.
According to BNP Paribas tech giant’s expectation of the BFSI vertical’s revenue returning to growth from the next quarter is a sign of cyclical recovery.
The brokerage house has raised the target price slightly to Rs 4,575 while maintaining a “Outperform” rating on the stock.
Philip Capital
As Tata Consultancy Services has Strong total contract values for four consecutive quarters, the brokerage believes growth can improve over the next few quarters as clients get more comfortable on macro points. Further, the brokerage said, “margins should marginally improve” in FY25 on operational efficiencies, easing supply-side pressures offset by large deal transition costs.
The brokerage house expects the company to continue to command a valuation premium over its peers, because of its strong diversified profile, superior return profile, stability in management, strong margins, and market leadership position. The brokerage maintained a “Buy” on the stock of the company and raised the target price marginally to Rs 4,180 from Rs 4,170.
Phillip Capital has largely maintained estimates on the company however minor tweaks are there. The brokerage house expects the company to deliver 4.1%/8.0%/9.0% revenue growth with 24.4%/24.9%/25.0% operating margins in FY24/25/26.
Elara Capital
The company’s overall third-quarter results were better than expectations. They have slightly raised FY25 estimates for earnings per share to 3-4% and roll forward by a quarter.
The brokerage house has raised the target price to Rs 4,430 from Rs 4,290, with an unchanged rating of ”Buy” as the brokerage believes the company offers the best earnings stability among peers, supported by margin resilience, a strong delivery engine, robust partnerships with hyper scalers and sturdy deal wins.
Equirus Securities
However, Equirus has a different view on the deal wins as it believes deal wins were soft on yoy basis, but the company management remains optimistic on deal pipeline and closure:
Regarding demand, the company is not witnessing any major trend reversal in the near term from ongoing soft spending by clients on information technology, but it now believes that once the macro uncertainty subsides technology spending will bounce back with some industries to witness pent-up demand, said Equirus Capital in a research report. It has started witnessing green shoots in the consumer segment with its expectation of growth revival in BFSI and Continental Europe ahead.
In the third quarter, the tech giant reported order wins worth $8.1 billion against $11.1 billion quarter on quarter, which includes BSNL orders of US$1 billion in the second quarter.
The brokerage house maintained a “Buy” rating on the stock but has raised the target price to Rs 4,055 from Rs 3,810.
