TCS Q1 results on Friday. What to expect from tech major this time?

IT major will kick start corporate earnings season this week, and if one were to go by what analysts say the IT major may not disappoint the Street, with a nearly 15 per cent jump in revenues and a 7-11 per cent year-on-year rise in June quarter profit. The demand commentary could be strong, they said, even as margin may take a hit on wage hikes.

In rupee terms,

Securities sees TCS reporting an 11.2 per cent YoY (0.9 per cent QoQ) rise in adjusted net profit at Rs 10,050 crore on a 15.2 per cent YoY (3.4 per cent QoQ) rise in net sales at Rs 52,320 crore. Ebit is seen growing 7.9 per cent YoY (down 1 per cent QoQ) to Rs 12,510 crore. Ebit margin is seen falling to 23.9 per cent from 5 per cent in the March quarter and 25.5 per cent in the June quarter last year, hurt by wage hikes and continued supply-side pressures.

Dollar revenue growth is seen at 3.4 per cent YoY or 1.5 per cent QoQ, with the cross-currency impact seen at 190 basis points. Deal wins and the impact of the macro weakness on growth will be key monitorable, Motilal Oswal said in a note.

Shares of TCS have fallen 15 per cent so far this calendar year compared with a 10 per cent drop in the BSE Sensex. Analysts noted there are concerns over the weakening of the global macro environment. IT stocks, they said, have seen derating of valuation multiples as earnings estimates have mostly remained intact or seen minor downgrades.

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“While the global macro fears are for real, we believe their impact on earnings will be minimal and temporary,” Phillip Capital said on the IT pack as a whole.

Emkay Global sees PAT for TCS rising 10.5 per cent YoY to Rs 9,958 crore on a 16.5 per cent rise in sales at Rs 52,915 crore. It is expecting a 2.1 per cent sequential growth in dollar revenues, factoring in a 190 basis points cross-currency headwinds. EBIT margin is likely to fall 150 basis points due to wage hikes and an uptick in travel and visa costs, it said.

expects TCS to report revenue growth of 1.4 per cent QoQ in dollar terms and 3.4 per cent QoQ in constant currency terms.

“The company is expected to post a margin decline of about 150 bps QoQ due to wage hike impact, Travel & Visa cost and supply constraints partially offset by operating leverage, price increase and currency tailwind,” Edelweiss said.

This brokerage expects profit to rise 7.4 per cent YoY (2.2 per cent QoQ) to Rs 9,703 crore.

Investors may watch out for deal momentum, tenure and pricing, attrition and supply-side pressure, client budget and how the pipeline is shaping amid geopolitical uncertainties and weak macro outlook, it added.

“We expect the company to provide an update on industry demand trends, client budget and risks if any, and the attrition rate,” it said.

Meanwhile, Phillip Capital expects CC revenue growth of 3.7 per cent on strong momentum in digital transformation programmes. it is expecting growth to be broad-based across verticals.

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(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)


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