Global brokerages UBS and Deutsche Bank reiterated their bullishness on the shares of Tata Consultancy Services, after India’s largest IT firm Tata Consultancy Services third quarter earnings ending December-17 beat street estimates. India’s largest IT firm, Tata Consultancy Services reported a 1.3 per cent quarter-on-quarter (QoQ) rise in net profit at Rs 6,531 crore for the quarter ended December 31, 2017.
Notably, lower tax & employees cost and higher other income helped the bottomline beat estimates. UBS has maintained a buy call on the shares to Rs Rs 3,000. TCS shares were trading at Rs 2,752 down by more than 1.3%.
UBS said that the earnings were in line with estimates. The firm said that it expects muted reaction given that the earnings were in line with previous quarter numbers. Further, UBS observed that pickup in retail is positive, but expressed concerned about the decline in banking.
The retail and CPG vertical showed a strong turnaround, growing 6.4 per cent as compared to the previous quarter.. Growth was led by energy & utilities (up 8.5% qoq), travel & hospitality (up 2.9 per cent qoq) and life sciences & healthcare (up 2.5% qoq).
Deutsche Bank too has maintained its target price on the shares, saying that the management expects BFSI to improve in 2018. The global firm observed that Ex-BFSI, the company reported a strong revenue growth in a seasonally weak quarter. The company has Seen robust recovery in retail and strong growth digital tech revenue, Deutsche bank noted.
Commenting on the Q3 performance, Rajesh Gopinath, CEO and MD said, “We wrapped 2017 with a strong performance in the December quarter, marked by the signing of industry-defining deals, robust client metrics and broad-based demand across industry verticals. As lagging parts of our portfolio turn around, and areas of softness reduce, we are well placed for stronger growth ahead.”
Rajesh Gopinathan said that the company is hopeful tapping the European market by next year. He said that the company expects Europe to become its second largest market by next year. While TCS is eyeing Europe, its weakness in the December quarter is seasonal because of holidays.
Employee benefit expenses rose, weighing on profitability. The outsourcers are anticipating major challenges from visa restrictions the n movement of personnel to the United States.