TCS‘s share price continued to make gains for the fourth straight session after reporting its December quarter results in the after-market hours on Thursday.
What Happened: India’s largest IT services company’s Q3 results beat analysts’ estimates on revenue but fell short on the bottom line. The consolidated net profit grew by 2% year-on-year (YoY), reaching ₹11,058 crore. Revenue witnessed a 4% increase, totaling ₹60,583 crore. While analysts’ projections had anticipated revenue at around ₹60,000 crore and a profit of ₹11,500 crore.
The Tata Group company attributed the decline in profit to a one-time charge of ₹958 crore incurred during the quarter for the settlement of a legal claim, which hurt the bottom line. The EBIT margin was reported at 25%, compared to 24.3% in the preceding quarter.
In addition to the financial results, the board recommended a special dividend payout of ₹18 per share along with an interim dividend of ₹9 per share.
During the third quarter, TCS secured contracts totalling $8.1 billion, reflecting a decrease from the $11.2 billion in deals acquired in the preceding September quarter.
Analyst Reactions: The results have mostly yielded positive reactions from analysts. Morgan Stanley upgraded the stock’s rating to “overweight” from “equalweight” raising the target price to ₹4,240 from ₹3,900. The brokerage said that the company’s revenue has shown resilience and the 25% EBIT was also achieved sooner than anticipated.
Bernstein also maintained its “outperform” rating for the stock with a target price of ₹4,170. The analysts said that the company delivered a strong quarter beating expectations on revenue and margin.
Kotak Securities also assigned an “add” call for the stock with a price target of ₹4,115. The brokerage said that the company has shown impressive cost management.
Motilal Oswal maintained its “buy” rating for the stock with a price target of ₹4,250. The domestic brokerage firm said that the company reported a strong quarter despite a weak demand environment.
However, not all analysts were convinced. Nomura maintained its “reduce” rating in the stock with a price target of ₹3,160. The firm said that demand pick-up visibility remains low.
Jefferies also maintained its “hold” rating for the stock with a price target of ₹4,000. The research firm said that the sharp decline in headcount suggests that the demand outlook is not that bright.
Price Action: TCS’s share price was trading 3.92% higher at ₹3,881.90 as the markets opened on Friday.
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