TCS Q1FY19 CC revenue growth at 4.1% QoQ is a meaningful beat to estimates and is highest in several quarters.
Shares of Tata Consultancy Services (TCS) rose 3% to Rs 1,928 per share on the BSE in early morning trade after the country’s biggest software services exporter posted a better-than-expected rise of about 23.5% year on year (YoY) and 6.3% quarter on quarter (QoQ) in first-quarter (Q1) net profit, helped by strong growth in its banking, financial services and insurance division (BFSI).
TCS has recorded a consolidated net profit of Rs 73.40 billion in April-June 2018 (Q1FY19) versus a profit of Rs 59.45 billion in the same quarter last year. While the revenues at the reported currency grew 15.8% YoY and 6.8% QoQ to Rs 342.61 billion, in constant currency (CC) terms, it rose by 9.3% year-on-year (YoY) and 4.1% sequentially.
Analysts on an average had expected profit of Rs 69.67 billion on revenue of Rs 341.69 billion for the quarter.
“TCS Q1FY19 CC revenue growth at 4.1% QoQ is a meaningful beat to estimates and is highest in several quarters. Revenue recovery has gathered further momentum with a definite growth revival in BFSI and retail verticals. Slowdown in these two verticals had adversely impacted FY18 growth and with the recovery double digit constant currency revenue growth is almost a certainty,” Antique Stock Broking said in a result review.
Overall, FY19 has started on a strong note for TCS. Company will outshine peer group in FY19 with CC revenue growth of ~12% while most of the peer group will grow at mid-single digit. TCS will also report YoY EBIT margin improvement and company has maintained aspirations to achieve 26%-28% EBIT margin range. Robust deal signings in 1QFY19 is after a very strong order booking in 4QFY18, the brokerage firm said with ‘buy’ rating on the stock and 12 month target price of Rs 2,090.(CLICK HERE : TATA COMPANY SHARE PRICE)
“TCS reported an above-expected operating performance in Q1FY19 driven by a beat on both revenue and margins. With a growth recovery in BFSI services in North America, management is confident of sustaining growth momentum in the medium term. Digital revenue growth accelerated for the fifth straight quarter, rising 44.8% YoY in CC terms,” analysts at BOB Capital Markets said in result review.
TCS is our only BUY-rated stock among tier-I players as we believe it is best placed to weather the structural challenges visible in legacy revenue portfolios. We have a Mar’19 target price of Rs 2,190 for the stock, revised from Rs 2,180 earlier as we tweak EPS estimates to factor in the Q1 performance, the brokerage said.
At 09:34 am; TCS was trading 2% higher at Rs 1,917 on the BSE, as compared to 0.11% rise in the S&P BSE Sensex. A combined 4.9 million shares changed hands on the counter on the BSE and NSE so far. The stock had hit an all-time high of Rs 1,930 on Monday, July 9, 2018 on the BSE in intra-day trade.
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