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TCS to flag off the earnings season — here’s what to expect

Jul 7, 2022, 09:17 IST
Business Insider India
BCCL
  • Tata Consultancy Service (TCS) is all set to kickstart the corporate earnings season this Friday.
  • Rising visa and travel costs, along with supply chain pressures may eat into TCS margins.
  • Multiple brokerages expect TCS’s net sales to be a little over ₹52,000 crore this quarter.
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Tata Consultancy Services (TCS) kicks off the corporate earnings season this Friday, with analysts expecting India’s top software services firm to post strong growth in the April-June quarter despite stress on its margins. In fact, analysts are expecting robust results from the top players in India’s information technology sector.

Wage hikes, currency volatility and a potential slowdown in international markets like US and Europe could impact the results of the Tata Group subsidiary, according to a report by Emkay published last month.

Increasing visa and travel costs, along with supply chain pressures, could also affect the operating margins.

Multiple brokerages expect TCS’s net sales to be a little over ₹52,000 crore in the first quarter of fiscal year 2023. The net profit expectations are in the range of ₹9,700 crore - ₹9,900 crore, as per Emkay Global, Edelweiss and Prabhudas Lilladher.

Motilal Oswal, on the other hand, expects TCS to cross ₹10,000 crore in net profit this quarter. The brokerage has recommended a buy on TCS shares, with a price target of ₹3,730 apiece.
BrokerageQ1 Sales estimatesQ1 Profit estimates
Motilal Oswal₹52,320 crore ₹10,050 crore
Emkay Global₹52,915 crore ₹9,958 crore
EdelweissN/A₹9,703 crore
Prabhudas Lilladher52,791 crore₹9,968 crore

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The company had reported profit after tax of ₹9,926 crore on revenue of ₹50,591 crore in the January-March quarter. Overall, TCS had reported a revenue of ₹1.91 lakh crore and a net profit of ₹38,327 crore for the fiscal year 2022.

Investors will need to keep an eye on TCS’ deal momentum, tenure and pricing of contracts, attrition and supply-side pressure, Edelweiss said in a report. TCS’ comments on client budgets and the deal pipeline amid geopolitical uncertainties and a weak macro outlook would be key and will provide insights into the prospects for the entire India’s IT sector.

For the full year ending 2023, TCS is expected to post a net profit of over ₹44,000 crore on revenue of over ₹2.2 lakh crore, according to Emkay Global.
FY2021FY2022FY2023EFY2024
Revenue₹1,64,177 crore₹1,91,754 crore₹2,23,110 crore₹2,57,114 crore
Net Profit₹32,430 crore₹38,327 crore₹44,678 crore₹51,861 crore
Source: Emkay Global
Note: ‘E’ stands for estimates

TCS shares have fallen 15% in value ever since the start of this year, and they closed at ₹3,265 on July 6. The company’s share price declined 13% in April-June 2022, performing better than the Nifty IT index’s 23.14% drop in the same period.

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