Software major TCS hits 3-month low; firm posts Q2 profit but margin woes remain

Top software services exporter Tata Consultancy Services Ltd (TCS) shares Friday fell as much as 2.9 per cent to 1,922.35 rupees, their lowest level since July 11.

The company’s Q2 recorded a profit of 79.01 billion rupees ($1.07 billion) beating estimates on Thursday, helped by revenues from retail sector and banking, financial services and insurance clients. Co saw double-digit revenue growth in this financial year. Jefferies cut PT to 2,300 rupees from 2,315 rupees citing EBIT margin of 26.5 per cent missing their expectation on lower operational efficiency gains.

Nomura is now expecting a marginal downside to consensus growth numbers and possible tempering of multiples, given the shift in liquidity scenario; maintains “reduce” rating with PT of 1,950 rupees.

Macquarie, however, is expecting Co to post strongest organic growth of Tier-1 pack; TCS’ premium valuations can be sustained on the back of this. Macquarie maintains “outperform” rating with PT of 2,345 rupees.

More than 1.9 million shares changed hands in the first half  an hour of trading as of 0402 GMT, compared with 30-day average of 2.7 million shares. 22 of 45 brokerages covering the stock rate it “buy” or higher, 16 “hold” and seven “sell” or lower; their median PT is 2,060 rupees ($1 = 74.0400 Indian rupees)

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