TCS Q2 Results Review - Demand Drivers Remain Intact With A Few Visible Signs Of Slowdown: KRChoksey

TCS' operating margin is likely to improve on the back of lower sub-con cost, softer attirition rate and higher efficiency.

<div class="paragraphs"><p>TCS Centre in Kochi.</p></div>
TCS Centre in Kochi.

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KRChoksey Research Report

Tata Consultancy Services Ltd.'s Q2 FY23 performance is marginally lower than our estimate. Dollar revenue was up 1.4% QoQ to $6,877 million (our estimate: $6,920 million). Rupee revenue grew by 4.9% QoQ to Rs 5,53,090 million.

Reported operating margin expanded by 90 bps to 24% on the back of lower employee expenses, operating leverage, and lower subcontractor expenses.

Reported net profit of Rs 1,04,650 million was slightly lower than our estimate of Rs 1,05016 million with margin of 18.9%.

In this quarter, TCS has registered a deal bookings of $8.1 billion, with a book-to-bill ratio of 1.2 times ($8.1 billion total contract value versus $8.2 billion in Q1), reflecting a stable demand environment. The total deal wins included $2.3 billion in banking, financial services and insurance and $1.6 billion in retail and consumer packaged good.

Operating margin is expected to improve on the back of lowering the sub-con cost, improvement in retention (outlook of attrition decline ahead), pricing, and efficiency.

TCS declared an interim dividend of Rs 8 per share.

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KRChoksey Tata Consultancy Services Q2FY23 Result Update.pdf


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