TCS Shares Jump 3% As Earnings Beat Street Estimates, Brokerages Upbeat

TCS‘s share price was racing at the bourses on Friday, going up close to 3% to hit an intraday high of ₹4,035.95.

What Happened: The surge today comes as the company’s June quarter results beat street estimates. The Tata Group company's net profit for the June quarter came in at ₹12,040 crore, an increase of 8.7% from the ₹11,074 crore profit reported in the same quarter last year.

The IT services company’s revenue for the quarter reached ₹62,613 crore, up 5.4% from ₹59,381 crore. Both the revenue and net profit exceeded analyst estimates of ₹62,150 crore and ₹11,975 crore, respectively.

Brokerage Reactions: Most brokerages were upbeat about the company’s strong performance. JP Morgan maintained its “overweight” rating for the stock, raising its target price to ₹4,600 from ₹4,500. The global research firm said it is encouraging that the company continued to gain momentum despite the sluggish demand environment.

Jefferies upgraded the stock’s rating to “buy” from “hold”, raising the target price to ₹4,615 from ₹4,030. The analyst said the company’s June quarter results beat its estimates and noted that net hiring being at a year high was an emerging sign of revival.

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UBS also maintained its “buy” rating for the stock with a price target of ₹4,600. The brokerage firm also reiterated that the IT major’s results beat its estimates. The analysts added that another quarter of outperformance could lead to re-rating for the company.

Nuvama also retained a “buy” rating with a price target of ₹4,800. The brokerage said June quarter results show a solid start to the turnaround year and that the earnings downgrade cycle for the company is now behind it.

Motilal Oswal also maintained its “buy” rating for the stock with a price target of ₹4,660. The analysts added that given its size, order book and exposure to long-duration orders and portfolio, TCS is well-positioned to withstand the lukewarm macro environment.

HDFC Securities maintained its “add” rating for the stock but raised the target price to ₹4,510 from ₹4,420. The brokerage said that the IT giant’s performance in the June quarter reflects signs of recovery and an improving growth trajectory.

Kotak Securities maintained its “add” rating for the stock raising the target price to ₹4,500 from ₹4,300. The brokerage said the IT services giant reported a healthy beat on revenue driven by a BSNL order and other large and mega deal ramp-ups.

Citi, on the other hand, maintained its “sell” rating for the stock with a price target of ₹3,645. The research firm said the revenue in the June quarter beat estimates driven by better performance in India and regional markets. The brokerage also highlighted that management is unsure if the growth can be sustained.

CLSA maintained its “hold” rating for the stock raising the price target to ₹4,007 from ₹3,990.

Price Action: TCS’ share price was up 2.32% to trade at ₹4,014.80 as the markets opened on Friday.

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