TCS Q3 Review - Mixed Results; Rising Near Term Uncertainty: Dolat Capital

Dolat Capital Report

Tata Consultancy Services Ltd. reported revenue growth of 2.3% QoQ in constant currency terms (our estimate: 1.8%), led by steady traction in retail and consumer packaged goods (1.3%, led by travel part), manufacturing (2.3%) and lifesciences and healthcare (2.7%).

Operating profit margin rose 52 basis points QoQ to 24.5% (our estimate: 24.5%), supported by 70 bps benefit from currency and and 30 bps gains on execution, offset by third party costs and return to normalcy costs of 50 bps. Expect further headwind in terms of opening up of offices, onsite shift and travel in coming quarters.

TCS' total contract wins stood at $7.8 billion, taking trailing twelve months TCV to $35.4 billion (up 8.9% YoY), hereon it expect TCV wins in the $7 billion-$9 billion band which may translate into flat-to-declining TCV for FY23, reflecting delayed decision making in certain pockets. Announced dividend per share of Rs 75 (Rs 8 interim plus Rs 67 special).

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