Tata Consultancy Services (TCS) is likely to report a consolidated net profit jump of 12-15% on-year for the quarter ended 31 December 2022. IT bellwether TCS is expected to report 16.5-17.5% revenue growth for October-December, according to analysts. Margins are expected to fall on an on-year basis. Among key things to watch out for will be TCS’ third interim dividend announcement. The company has already announced that the board of directors will consider the third interim dividend for FY23 on Monday. It has fixed 17 January as the record date to determine eligible shareholders for the dividend.
TCS Q3 margins likely to remain flat; supply side constraints moderate
According to Axis Securities, TCS revenue might come at Rs 57,280 crore this quarter compared to Rs 48,885 crore during the same quarter last year, registering a growth of 17.2% on-year. The consolidated profit after tax (PAT) is expected at Rs 10,943 crore against Rs 9,769 crore in the corresponding period last year, registering an on-year growth of 12%. Analysts at Axis Securities expect moderate growth, aided by ramp-up on large deal wins in the previous quarters. Margins are expected to remain flat due to moderation in supply-side constraints. “We expect moderate deal wins in the quarter. Management commentary on the new deal ramp up and visibility going ahead is a key thing to watch,” they said.
“Over the past two years, aggressive client spending in technology and large deal ramp-ups helped in overcoming the seasonal weakness of Q3,” foreign brokerage Nomura said. This time, industry seasonality is set to return with pain further accentuated by macro concerns of slowdown in the US and Europe.
Cross Currency revenue growth likely for TCS in Q3 results
Analysts at Reliance Securities expect constant currency revenue growth of 1.6% on a sequential basis. The company had earlier indicated headwinds in P&C insurance, Mortgage, discretionary retailers in Europe and the UK, and potentially higher furloughs, it said. Domestic brokerage firm ICICI Securities said, “We expect dollar revenue growth of 1.2% on-quarter, accounting for 30 bps cross currency headwinds. Rupee revenue is expected to grow 3.5% on-quarter, aided by rupee depreciation.”
Key things to watch from TCS Q3 financial results
Management commentary on deal wins will be keenly eyed to get a sense of any slowdown in client spends. Analysts at Kotak Institutional Equities expect total contract value (TCV) of more than $9 billion for the quarter, stating that the company has been active in a number of deal announcements. BT Group and UK Government’s rail data marketplace were some of the significant deal-wins of the past quarter.
Commentary on rate of spending increase or decline and priorities of clients; impacted geographies and verticals especially hi-tech and retail; and attrition rate and vendor consolidation opportunities, will also be monitored.“Key monitorables for the entire (IT) sector include commentary and progression on client budgets, outlook of key verticals, commentary on pipeline, bookings trajectory, and hiring intensity,” said Apurva Prasad, Institutional Research Analyst, HDFC Securities.
TCS Q3 results estimates
Net Sales: Rs 57,058 crore, 16.7% on-year
EBIT: Rs 14,022 crore, 14.6% on-year
EBIT margin: 24.6%
APAT: Rs 10,890 crore 11.5% on-year
Revenues: Rs 57,280 crore, 17.2% on-year
EBITDA: Rs 15,250 crore, 24.6% on-year
EBIT Margin: 26.6%
PAT: Rs 10,942 crore, 12% on-year
Revenue: Rs 57,496 crore, 17.6% on-year
EBITDA: Rs 14,322 crore, 17% on-year
EBIT Margin: 24.9%
Net Income (PAT): Rs 11,261 crore, 15.3% on-year
Revenue: Rs 57,221 crore, 17.1% on-year
EBITDA: Rs 15,049 crore, 12.0% on-year
EBIT Margin: 24.9%
PAT: Rs 10,723 crore, 9.8% on-year
Motilal Oswal Financial Services
Revenue: Rs 57,300 crore, 17.2% on-year
EBIT margin: 21.6%
APAT: Rs 11,220 crore; 14.4% on-year
Revenues: Rs 57,270 crore, 17.2% on-year
EBITDA: Rs 14,033 crore, 14.7% on-year
EBIT margin: 24.5%
PAT: Rs 11,317 crore, 15.8% on-year