TCS - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 3120, MCap - Rs. 11,70,875 crore)

Tata Consultancy Services (TCS) reported a healthy set of Q3FY21 results and were above our estimates on all fronts. The growth was across geographies and verticals. The QoQ growth in revenues was led by healthy demand in core transformation services and conversion from earlier deals. In terms of geographies (in CC terms), North America grew 3.3% QoQ, UK & Continental revenues increased 4.5% QoQ & 2.5% QoQ. In terms of verticals, revenue growth was led by Manufacturing (up 7.1% QoQ), BFSI (up 2% QoQ), Life Sciences and healthcare (up 5.2% QQ), Communication & Media (up 5.5% QoQ), Regional Markets & Others (up 7.3% QoQ) and Retail & CPG (up 3.1% QoQ). The attrition stood at 7.6% and the company added 15,721 associates taking the total to 469,261. The company deal pipeline continues to be healthy.

Q3FY21 Earnings Summary

- Constant currency revenues grew 4.1% QoQ, above our estimate of 3.0%. US$ revenues grew 5.1% QoQ to $5,702 million, above our estimate of 3.6% QoQ growth and $5,619 million estimate

- Rupee revenues grew 4.7% QoQ to Rs. 42,015 crore (above our estimate of Rs. 41,470 crore)

- EBIT margins expanded 42 bps QoQ to 26.6%, above our estimates of 25.1%. This was mainly on account of better effort mix, improvement in utilisation, productivity, revenue growth partially offset by wage hikes

- PAT of Rs. 8,701 crore was above our estimate of Rs. 8,578 crore estimate on the back better operating performance

- TCS has declared an interim dividend of Rs. 6 per share

The company aspires to register double-digit revenue growth in FY22E. This coupled with healthy deal pipeline, increase in deals like captive carve outs and robust margins keep us positive on the stock from a longer term perspective. We would be revisiting our estimates and target price shortly.

Shares of TATA CONSULTANCY SERVICES LTD. was last trading in BSE at Rs.3120.35 as compared to the previous close of Rs. 3032.7. The total number of shares traded during the day was 210057 in over 14084 trades.

The stock hit an intraday high of Rs. 3127.55 and intraday low of 3061.8. The net turnover during the day was Rs. 651218381.

Source : Equity Bulls

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