Tata Consultancy Services Limited - 1QFY2018 Result Update - Angel Broking

For 1QFY2018, TCS posted below expectation results on the EBIT and net profit fronts. The company posted 3.1% sequential growth in USD revenues to US$4,591mn v/s. US$4,585mn expected, mostly volume lead (3.5% qoq growth). On Constant Currency terms, the company posted a 2.0% qoq growth. On profitability, the EBIT margins came in at 23.4% v/s. 24.2% expected, posting a qoq dip of 236bps. Impact of wage hikes and visa expenses, apart from rupee appreciation were the major drags on profitability. Consequently, PAT came in at Rs. 5,945cr v/s. Rs. 6,275cr expected, de-growth of 10.0% qoq. We maintain our Accumulate rating with a target price of Rs. 2,651.

Quarterly highlights: Company posted 3.1% sequential growth in USD revenues to US$4,591mn v/s. US$4,585mn expected, mostly volume lead (3.5% qoq growth). On Constant Currency terms, the company posted a 2.0% qoq growth. In terms of geography, Latin America and Continental Europe posted a qoq growth of 2.8% and 5.9% respectively. Its key market USA posted a qoq growth of 1.7%. India and Asia Pacific posted a qoq growth of 1.5% and 1.2% respectively. On profitability, the EBIT margins came in at 23.4% v/s. 24.2% expected, posting a qoq dip of 236bps. Impact of wage hikes and visa expenses, apart from rupee appreciation were the major drags on profitability. Consequently, PAT came in at Rs. 5,945 v/s. Rs. 6,275cr expected, de-growth of 10.0% qoq. On operational front, the LTM attrition was at 11.6% in IT Services.

Outlook and valuation: The Company has been cautiously optimistic regarding its outlook for FY2018, with key verticals like BFSI and Hi-Tech expected to post a recovery. Also, on the EBIT front the company is confident of managing the EBIT margins in the range of 26-28%. We expect TCS to post revenue CAGR of 8.5% in USD as well as INR terms over FY2017-19E. Hence, maintain our Accumulate recommendation.

Shares of TATA CONSULTANCY SERVICES LTD. was last trading in BSE at Rs.2490.9 as compared to the previous close of Rs. 2445.2. The total number of shares traded during the day was 43547 in over 2740 trades.

The stock hit an intraday high of Rs. 2499 and intraday low of 2439.8. The net turnover during the day was Rs. 107700957.

Source : Equity Bulls

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