Should You Buy, Sell Or Hold TCS Shares Post Upbeat Q4 Earnings? Here’s What Analysts Say

TCS Share Price Today: TCS share price rose nearly 2 per cent in early trade on Monday, April 15, despite weak market sentiment amid escalating tensions between Israel and Iran. However, the IT stock was trading in the red later in the day.

During the March quarter, TCS reported a 2.2 per cent YoY increase in its revenue at Rs 61,237 crore in constant currency terms, despite ongoing demand weakness.

Its consolidated net profit for the quarter under review stood at Rs 12,434 crore, up 9.1 per cent YoY and 12.4 per cent QoQ.

The company’s operating margin in Q4 saw an increase of 150 bps YoY at 26 per cent while the net margin saw an expansion of 100 bps YoY at 20.3 per cent.

The company also reported its best quarterly deal TCV of $13.2 billion (up 63 per cent  QoQ/32 per cent YoY, book-to-bill ratio at 1.8x), including one mega-deal. The company maintained its strong operating margin performance, with EBIT margin up 100bp QoQ to 26.0 per cent, the lower end of its medium-term guidance band for the first time in the last 12 quarters.

What Should Investors Do?

Nuvama Wealth Management upgraded TCS’ FY25E and FY26E earnings per share (EPS) marginally by 1.1 per cent and 2 per cent, respectively, and maintained a buy recommendation with a target price of Rs 4,560 against Rs 4,450 earlier, valuing it at 27 times FY26 PE (price-to-earnings ratio).

Nuvama observed the TCS’ revenue in Q4FY24 was in line while margin and earnings performance beat estimates.

“We maintain Q3FY24 was the bottom for the earnings downgrade cycle for the sector and expect the strong deal wins of the last few quarters to gradually convert into revenue in coming quarters, even as the US macro becomes favourable. We see TCS as a perfect large-cap proxy to play this upcycle, with its strong deal wins and robust margin performance,” said Nuvama.

Global brokerage JPMorgan upgraded the stock to overweight rating and upgraded the target price of Rs 4,500, saying that the earnings surprised positively on margins. With deal signings at highest ever and TTM book to bill at 1.5x, TCS is likely to outpace peers in FY25, it said.

Goldman Sachs, which has a target price of Rs 4,350 on TCS with a buy rating, said it sees an increasing probability of double-digit earnings growth in FY25. Jefferies has given a target price of Rs 4,030 while Morgan Stanley is overweight on TCS with a target price of Rs 4,350.

Brokerage firm Motilal Oswal Financial Services also maintained a buy call on the stock with a target price of Rs 4,600.

“Given its size, order book and exposure to long-duration orders and portfolio, TCS is well-positioned to withstand the weakening macro environment and ride on the anticipated industry growth. Owing to its steadfast market leadership position and best-in-class execution, the company has been able to maintain its industry-leading margin and demonstrate superior return ratios,” said Motilal Oswal.

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