TCS Q3 Results: Brokerages Remain Cautious Over Weakness In Key Verticals
Most analysts remained concerned over weakening key verticals and lofty valuations at India's largest software services company even as its third-quarter profit met estimates.
Tata Consultancy Services Ltd.’s operating margin rebounded from a nine-quarter low on the back of a weaker rupee and cost efficiencies.
Here’s what the brokerages had to say:
- Maintaining ‘Sell’ on weak Q3 results; Target Rs 1,975.
- Banking, financial services and insurance and the U.K. business were particularly sluggish with declines sequentially.
- Impacted by challenges in BFSI and retail, expectations still remain elevated.
- Raise target to Rs 1,950 from Rs 1,892, Maintain ‘Neutral’ on third successive revenue miss.
- BFSI and retail-led growth moderation continues; EBIT margin at 25 percent surprised positively.
- Don’t expect a pick up anytime soon with persistent BFSI headwinds.
- Valuations remain steep at 24x and are concerning.
- Raise target to Rs 2,175 from Rs 2,137, Maintain ‘Hold’.
- Revenue deceleration in BFSI and North America overshadows margin performance.
- Operating margin expanded, aided by a lower headcount.
- Expensive valuation and lack of margin levers keep us wary on the stock.
- Cut target to Rs 2,063 from Rs 2,076; Maintain ‘Neutral’
- Expected to face cyclical demand downturn in its key industry verticals over the next few quarters.
- Stock is currently trading at 23.7x earnings per share estimate for FY21 versus Indian IT sector at 16.5x.
- Raise target to Rs 1,950 from Rs 1,900, Maintain ‘Hold’ on headwinds and valuations.
- Soft revenue growth, led by tepid banking business, particularly in the U.S./U.K. large banks.
- TCS may, at some stage, need to offer higher deal flexibility to revive growth.
- Management expects the U.K. business to revive in the coming quarters with improving political certainty.
- Maintain ‘Reduce’; Raise target to Rs 2,020 from Rs 1,900 on rollover to 2021 EPS.
- Moderation in growth and on expected lines for Q3.
- Weak revenue growth impacted by slowdown in financial services and technology verticals.
- TCS is an excellent business. However, current valuations are expensive.