Home / Companies / News /  How TCS shares could react to Q1 results on Monday

The quarterly earnings of Tata Consultancy Services (TCS) were bittersweet as the company missed the street's expectations due to pressure in margins and high attrition rate. Sequentially, TCS performance was dull, however, year-on-year the growth was favourable. Now, all attention will be on how TCS shares  perform on Monday after the June 2022 (Q1FY23) result. TCS announced its financial performance after market hours on Friday and investors betted cautiously on the company.

On a consolidated basis, TCS recorded a net profit of 9,478 crore up from 9,008 crore in Q1FY22. PAT declined from 9,959 crore witnessed in March 2022 quarter. Consolidated revenue jumped to 52,758 crore in Q1FY23 as against 45,411 crore in Q1FY22 and 50,591 crore in Q4FY22. Constant currency revenue growth is at 15% yoY, while it stood at 3.5% sequentially.

In Q1FY23, the company's net margin stood at 18%. While its operating margin dipped 2.4% yoy to 23.1% in the quarter. Margins were impacted due to the annual salary increase, the elevated cost of managing the talent churn, and gradually normalizing travel expenses.

TCS garnered an order book of $8.2 billion with stellar client metrics. In Q1FY23, TCS added 9 new clients into the over $100 million band yoy, while 19 clients added to the over $50 million band.

On BSE, ahead of the earnings, sentiment in TCS was bearish. The stock ended at 3,264.85 apiece down by 22.10 or 0.67%. TCS which is the second most valued company in terms of market share and the largest IT services provider, saw its valuation erase the 12 lakh crore mark. The company's market valuation stood at 11,94,625.39 crore by end of Friday's session.

How will TCS shares react after the Q1 result:

Post earnings, Santosh Meena, Head of Research, Swastika Investmart Ltd. on TCS Q1 Results TCS missed street expectations in Q1 earnings as margins are under pressure and the attrition rate is still high. However, the counter headed in its Q1 earnings with tepid expectations therefore there is no knee jerk reaction expected while buying can be seen at lower levels.

"Technically, The counter is still making lower highs and lower lows formation where a 50-DMA of 3333 is an immediate hurdle; above this, we can expect a short-covering rally towards the 3470-3500 zone. It has to sustain above the 3500 mark for any major buying interest. On the downside, 3200 is an immediate support level; below this, it is vulnerable to a fall towards the 3000 mark however 3000 is a good level for fresh entry," Meena added.

Mitul Shah- Head of Research Associate at Reliance Securities said, "TCS is likely to be one of the key beneficiaries of medium-term uptrend in technology spending. We expect TCS to gain market share on the back of vendor consolidation and captive monetization efforts. However, moderation in EBIT margins and lower order book would reduce pace of earnings growth going ahead and may lead to downward revision to valuation multiple. We are positive on structural IT story and remain constructive on TCS being key beneficiary of IT up cycle. We remain positive on stock given its strong revenue growth, elevated EBIT margin and industry leading return ratios. At present we have BUY rating on the stock."

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