The firm is expected to continue with its good performance in the second quarter of FY19 as well. Here has been mentioned what leading brokerages expect from the June quarter earnings are:
IT bellwether Tata Consultancy Services (TCS) is to declare its September quarter earnings today. It has expected in the majority that IT companies to report healthy numbers led by the ramp-up of current large deal wins, improving the macro environment, and strong seasonality.
TCS posted better-than-expected results for the June quarter of FY19. The IT services firm posted 23.5 % increase in its consolidated net profit at Rs 73.62 billion, while in sequential terms, the net profit grew by 6.3%.
The firm is expected to continue with its good performance in the second quarter of FY19 as well. Here’s what leading brokerages expect from the June quarter earnings –
On the back of $1.6 billion deal win in BFSI alone, the analysts expect high growth momentum from the largest revenue contributing vertical. Execution of current deal wins and seasonal strength would ensure maintenance of revenue growth trends. It expects 4 % QoQ CC growth in 2QFY19 (2.8% QoQ in US dollar terms). PAT (Profit after tax) estimate stands at Rs 77.9 billion.
Key issues to watch for
- New deal wins and outlook on continual of traction seen so far;
- Traction in new initiatives (Digital/automation/solutions);
- Margin expectations for the next year
Experts expect TCS to deliver healthy revenue growth led by the ramp-up of current large deals won during the last couple of quarters, with CC (constant currency) revenue growth of 3.9 % QoQ. The cross-currency headwinds to be 110 bps. Net profit is expected to grow 23.9 %YoY and 8.8% on QoQ basis at Rs 79.87 billion. Sales are expected to grow 19.8 % YoY and 6.8 % QoQ at Rs 365.89 billion. Operating profit margin will come in at 27.6 %, up 92 bps (YoY) and 117 bps (QoQ). It expects the company to deliver best-in-class organic CC (constant currency) revenue growth of 3.9% QoQ, led by broad-based performance across verticals and continued growth momentum in the digital business. EBITDA margin is expected to improve (120 BPS QoQ) on the absence of a wage hike, rupee fallen and productivity improvements. It has a buy rating on the stock with the target price of Rs 2,400.
It has built in a 3.8 % QoQ constant currency (CC) revenue growth with 150 bps QoQ cross currency depreciation leading to a 2.3% growth in US dollar terms. Reported growth is expected to be superior by 330 bps on sharp rupee depreciation during the quarter. “We expect gains of about 140 bps on operating margins on a sequential basis due to wage/visa impact normalization and rupee depreciation”.
TCS to post CC growth of 3.5 % QoQ. Execution of current deal wins and seasonal strength would ensure maintenance of revenue growth trends, in our view. The main focus will be on new deal wins and outlook on continual of traction seen so far and also on commentary on client budgets, Diligenta, and outlook of BFSI and retail.
All verticals will report healthy growth. Expect EBIT margin expansion of 150 bps led by 105 bps from Rupee depreciation, absorption of wage revisions and operational efficiencies. It seems the net profit to rise 25 %, led by acceleration in growth and currency tailwinds. The brokerages expect investor focus on the demand outlook for the rest of the year, the pipeline of large deals, EBIT margin outlook and reinvestment plans of the recent currency windfall and pace and nature of digital deals won.