After Q1 results above market expectations, TCS shares increase by over 3%

Following the IT giant’s Wednesday announcement of a higher-than-anticipated June quarter profit, Tata Consultancy Services (TCS) shares increased by about 3% in early Thursday trading.

For the June quarter of fiscal 2024, TCS reported a 16.84% year-over-year (YoY) rise in total net profit to Rs 11,074 crore. The business generated a profit of Rs 9,478 crore for the same period in the previous year. The net profit decreased 2.8% sequentially.

In comparison to the same quarter the previous fiscal year, total revenue increased by about 13% YoY to Rs 59,381 crore from Rs 52,758 crore. Revenue climbed by 0.5% on a sequential basis.

The stock’s opening price on the Bombay Stock Exchange (BSE) on Thursday during the trading session was Rs 3,276 per share.

The stock was trading 2.888% higher at Rs 3,353 at 11:00 AM on the BSE.

Additionally, an interim dividend payment of Rs 9 per share was authorized by the corporate board.

Operating margin for the big IT company decreased from 24.5 percent in the March quarter of FY23 to 23.2 percent in the June quarter of FY24, a decline of 130 basis points (bps).

“We remain confident in the longer-term demand for our services, driven by the emergence of newer technologies,” said K Krithivasan, Chief Executive Officer and Managing Director of the business.

“We are investing early in building scaleable capabilities on these new technologies, as well as in research and innovation, so we can maximize our participation in these opportunities,” he said.

“The stock post the respectable result announcement has indicated a positive bullish candle with a trend reversal from the confluence of significant moving averages of 200 period MA and 50EMA near 3260 levels to improve the bias and has scope for further rise in the coming days,” according to the report. The first short-term aim may be anticipated to be close to 3400, and with further strength, the momentum may continue up to levels between 3580 and 3640. According to Vaishali Parekh, Vice President of Technical Research at Prabhudas Lilladher Pvt. Ltd., the assistance may be maintained in the vicinity of the 3260 zone.

Increases in certain cost overheads and wage rates have a negative impact on TCS’s profitability. Three times every week, almost 55% of the company’s employees are now working from the office.

The 12-month trailing attrition rate was 17.8%, down from 20.1% a quarter earlier as the attrition rate continued to drop.

“TCS lit the ceremonial starting pistol on fire to begin the Q1 earnings period. The findings seem to be better than the street estimates. According to Prashanth Tapse, Senior VP Research at Mehta Equities Limited, the sector has done well overall despite growing macroeconomic challenges that have decreased demand from western nations.

We continue to be optimistic about the industry because we think the worst is over, he continued.

In order to account for the muted profits, JP Morgan has lowered its target price for the company from Rs 2,700 to Rs 2,650 while keeping its ‘underweight’ recommendation. Additionally, the brokerage firm said that the business was experiencing near-term downturn brought on by uncertainty as a result of project pauses and delays.

With a price objective of Rs 2,800, foreign brokerage Nomura maintained a “Reduce” rating on the stock. Motilal Oswal Financial Services and Nuvama Institutional Equities maintained their “Buy” recommendation on the stock.

“Given its size, order book, exposure to long-duration orders, and portfolio, TCS is well positioned to withstand the weakening macro environment and ride on the anticipated industry growth,” the Motilal Oswal study said.