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  1. TCS share price falls over 4% on weak Q2 earnings; Sharekhan retains ‘Buy’ rating

TCS share price falls over 4% on weak Q2 earnings; Sharekhan retains ‘Buy’ rating

Tata Consultancy Services (TCS) share price fell as much as 4.40 per cent in the morning trade on Wednesday after the company delivered another soft quarter (Q2) of growth.

By: | Updated: October 14, 2015 4:38 PM
TCS Sensex

Tata Consultancy Services (TCS) share price fell as much as 4.40 per cent in the morning trade on Wednesday after the company delivered another soft quarter (Q2) of growth. (Photo: PTI)

Tata Consultancy Services (TCS) share price fell as much as 4.40 per cent in the morning trade on Wednesday after the company delivered another soft quarter (Q2) of growth adding to the worries of Indian IT sector after Infosys cut US dollar revenue growth guidance and HCL Technologies’ revenue warning. However, broking house Sharekhan, in a note, said it retains its ‘valuation premium for TCS’, but tweaked estimates.

At 10.48 am (IST), TCS share price was trading 3.63 per cent down at Rs 2,503 apiece. The scrip opened at Rs 2,550 and had touched a high/ low of Rs 2,550 and Rs 2,483.05, respectively, in trade so far. Sensex was down 18.85 points at 26,827.68.

Later the scrip closed 4.39 per cent at Rs 2,483.40.

For the second quarter (Q2) ended September 2015, TCS posted net profit of Rs 6,084 crore, up 7.05 per cent against Rs 5,684.12 crore in the sequential quarter ended June, 2015. Net profit of the company jumped 16.02 per cent on year-on-year basis. Net sales of the company jumped 5.83 per cent qoq at Rs 27,165.48 crore.

Sarabjit Kour Nangra, VP research, IT, Angel Broking, said, “TCS, posted results below expectation on sales front and net profit, while the EBIT margins remained in line with expectations. On sales front, the company posted a 3 per cent sequential growth in dollar revenues to $4,156 mn V/s $4,177 mn expected. On constant currency (CC), the company posted a 3.9 per cent qoq rise in sales. In rupee terms, revenues came in at INR 27,165 cr V/s INR 27,244 cr expected.”

On the TCS results, Sharekhan in a research report said, “We have tweaked our earnings estimates attributed to the revenue miss and reset of currency estimates to Rs 65 and Rs 64 for FY2016E and FY2017E. At the current market price, the stock trades at 21x and 19x its FY2016 and FY2017 earnings estimates. We continue to remain positive on TCS, given its strong positioning, scale advantage and headstart in the digital technology space (highest among the top Indian IT companies), which justify the valuation premium for TCS over others. We maintain our ‘Buy’ rating on the stock with an unchanged price target of Rs 3,000.”

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