Nifty top gainers include TCS shares after a positive Q4 performance. Is it better to hold, sell, or buy?

In early trading on Monday, April 15, TCS’s share price increased by about 2%, despite a negative outlook from the market due to the growing tensions between Iran and Israel.

The Indian IT giant TCS posted better-than-expected March quarter profits, and the stock gained bullish sentiment from a number of brokerage companies.

In comparison to its previous close of ₹4,001.40, the TCS share price began unchanged at ₹4,001.40. It then increased by around 1.6% to reach ₹4,064.20 on the NSE. TCS’s share price was among the top gainers in the Nifty 50 index at 9:35 a.m., trading at ₹4,024.95, up 0.59%, while the Nifty 50 was down 1.07% at 22,277.90.

Compared to the benchmark Nifty 50, which has increased by almost 4% this year, the share price of TCS has increased by over 5% so far.

TCS Q4 result For the fourth quarter of FY24, TCS reported consolidated revenue from operations of ₹61,237 crore. This represented increases of 1.1% QoQ and 3.5% YoY, respectively. In constant currency (CC) terms, revenue increased 2.2% year over year.

For the reviewed quarter, its consolidated net profit was ₹12,434 crore, up 12.4% QoQ and 9.1% YoY.

In Q4, the company’s operating margin increased by 150 basis points year over year to 26%, while its net margin increased by 100 basis points year over year to 20.3%.

Brokerage opinions on TCS Nuvama Wealth Management maintained a buy recommendation with a target price of ₹4,560 against ₹4,450 earlier, valuing it at 27 times FY26 PE (price-to-earnings ratio). It upgraded TCS’ FY25E and FY26E earnings per share (EPS) marginally by 1.1% and 2%, respectively.

While TCS’s revenue in Q4 FY24 was in line with expectations, Nuvama noted that its margin and profitability performance exceeded forecasts.

“We continue to believe that Q3 FY24 was the bottom of the sector’s earnings downgrade cycle, and even as the US macro outlook improves, we anticipate that the solid contract wins of the last few quarters will progressively translate into revenue in the next quarters. With its solid margin performance and several contract wins, we see TCS as the ideal large-cap proxy to benefit from this upcycle,” Nuvama said.

Additionally, Motilal Oswal Financial Services, a brokerage company, maintained a buy call on the shares with a ₹4,600 target price.

“TCS is well positioned to weather the deteriorating economic climate and benefit from the projected expansion of the sector, thanks to its scale, order book, exposure to long-duration orders, and portfolio. The firm has been able to sustain its industry-leading margin and exhibit outstanding return ratios because of its unwavering market leadership position and best-in-class execution,” said Motilal Oswal.

Kotak Institutional Equities maintained its ‘add’ call on TCS shares and increased its target price, or fair value, from ₹4,140 to ₹4,300.

Despite significant transaction wins, Kotak predicts that low discretionary expenditure will continue into the current fiscal year (FY25), which is accounted for by a roughly 1% reduction in FY25–26E revenue.

Strong ties with a high-calibre F-500 clientele and a well-rounded offering of services that appeal to discretionary and cost-reduction-focused firms would allow TCS to achieve steady development. Thanks to the BSNL ramp-up, we anticipate that TCS will beat rivals in growth in FY25,” Kotak said.

As reported by CNBC-TV18, JPMorgan raised the stock to an ‘overweight’ rating among international brokerage companies with a target price of ₹4,500.

“Think the business is a cross-cycle champion and that cost-takeout agreements will help it in the near run. Discretionary digital transformation agreements will help the corporation in the medium run, according to JPMorgan, as reported by CNBC-TV18.

With a target price of ₹4,350, Morgan Stanley maintained its “overweight” perspective on TCS, noting that a large exit margin indicates a more optimistic forecast for FY25. According to CNBC-TV18, Goldman Sachs maintained a buy call on the shares with a target price of ₹4,350.

Additionally, Jefferies maintained their hold call on the shares, aiming for ₹4,030. According to CNBC-TV18, it said that although Q4 results are above estimates, demand pressure is still present.

Although deal bookings were good, management’s assessment was cautious. It is unsettling to see a steep drop in subcontractors and a persistent loss in headcount. Margin has little room to grow in the future. The upside is limited by premium valuation. Anticipate 6.6% CAGR in constant currency (CC) sales and 9% CAGR in earnings per share (EPS) from TCS over FY24–2026, according to Jefferies, as cited by CNBC-TV18.