TCS slips ahead of Q1 results; here's what analysts say
The scrip dipped 0.57 per cent to Rs 2,205 on the BSE
By ETMarkets.com | Updated:
BCCL
NEW DELHI: Shares of TCS dropped 1 per cent in Thursday's trade ahead of the IT major's June quarter results. Analysts are largely expecting the Tata Group firm to report a 5 per cent year-on-year (YoY) fall in profit for the quarter on a modest rise of 1.7-3 per cent rise in sales, led by weakness in business verticals such as BFSI and retail. Dollar revenues are seen falling 6-7 per cent while Ebit margin is seen above 24 per cent.
During the June quarter, Nifty IT index underperformed Nifty by 420 basis points, even as companies such as Accenture, TCS and Cognizant indicated that the demand environment was not as bad as was feared in early April.
For TCS stock, the demand outlook, conversion rate of the recent deal wins into revenues, and an update on pricing pressure, if any, would hold the key, analysts said.
Antique Stock Broking expects the IT firm to clock a 5.3 per cent fall in profit at Rs 7,717 crore from Rs 8,153 crore in the same quarter last year. Revenues are seen rising by 1.8 per cent to Rs 38,841.90 crore from Rs 38,172 crore YoY. Dollar revenues are pegged at $5,117 million against $5,485 million, down 6.7 per cent. Ebid margin may expand 40 basis points to 24.6 per cent from 24.2 per cent YoY, but would be lower than March quarter's 25.1 per cent, the brokerage said.
"The revenue decline will be led by weakness in BFSI and retail revenues on lower interest rates and record store closure by brick-and-mortar retailers. We expect margins to reduce by 50 bps QoQ, impacted by a decline in revenue, lower utilisation and cross-currency headwind, cut in variable pay, lower travel cost and subcontracting cost," it said.
TCS stock is up 5 per cent year-to-date compared with an 11 per cent fall in the BSE Sensex and in line with peer Infosys' 5 per cent gains during the same period.
"We expect TCS to post constant currency revenue de-growth of 5.3 per cent and cross-currency headwinds of 72 bps. We expect weakness in revenue growth due to weakness in BFSI caused by ODC due to lockdown, weakness in retail, travel & transport," the brokerage said.
The shares of the company closed 0.60 per cent lower at Rs2204.35 on BSE.
During the June quarter, Nifty IT index underperformed Nifty by 420 basis points, even as companies such as Accenture, TCS and Cognizant indicated that the demand environment was not as bad as was feared in early April.
For TCS stock, the demand outlook, conversion rate of the recent deal wins into revenues, and an update on pricing pressure, if any, would hold the key, analysts said.
Antique Stock Broking expects the IT firm to clock a 5.3 per cent fall in profit at Rs 7,717 crore from Rs 8,153 crore in the same quarter last year. Revenues are seen rising by 1.8 per cent to Rs 38,841.90 crore from Rs 38,172 crore YoY. Dollar revenues are pegged at $5,117 million against $5,485 million, down 6.7 per cent. Ebid margin may expand 40 basis points to 24.6 per cent from 24.2 per cent YoY, but would be lower than March quarter's 25.1 per cent, the brokerage said.
"The revenue decline will be led by weakness in BFSI and retail revenues on lower interest rates and record store closure by brick-and-mortar retailers. We expect margins to reduce by 50 bps QoQ, impacted by a decline in revenue, lower utilisation and cross-currency headwind, cut in variable pay, lower travel cost and subcontracting cost," it said.
TCS stock is up 5 per cent year-to-date compared with an 11 per cent fall in the BSE Sensex and in line with peer Infosys' 5 per cent gains during the same period.
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Prabhudas Lilladher expects TCS to report a profit of Rs 7,699 crore. It sees sales rising by 1.7 per cent to Rs 38,803 crore. This brokerage expects Ebit margin to fall 14 basis points to 24 per cent."We expect TCS to post constant currency revenue de-growth of 5.3 per cent and cross-currency headwinds of 72 bps. We expect weakness in revenue growth due to weakness in BFSI caused by ODC due to lockdown, weakness in retail, travel & transport," the brokerage said.
The shares of the company closed 0.60 per cent lower at Rs2204.35 on BSE.
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