TCS trades firm ahead of Q2 results

Tata Consultancy Services (TCS) was trading 2% higher at Rs 2,510 on the BSE in an otherwise subdued market ahead of July-September quarter (Q2FY18) results on Thursday, October 12, 2017.

Since July 13, 2017, post April-June (Q1FY18) results, the stock was marginally up by 0.63% against 0.35% decline in the benchmark S&P BSE Sensex till Tuesday.

Brokerage firms expect TCS to report revenue growth of around 2% on constant currency (CC) terms for Q2FY18 over Q1FY18, while EBIT (earnings before interest and tax) margin is likely to improve on account of absence of wage hike, visa cost and cross currency benefit.

“We expect constant currency revenue growth of 2.1% and cross-currency tailwind of 130 bps. The growth is weaker than usual and impacted by soft BFS (banking and financial services) in North America and industry-wide challenges in the Retail vertical,” Kotak Securities said in a Q2FY18 results preview.

“We expect EBIT margin to recover 125 bps qoq on normalization of wage hike, cross-currency tailwinds and operational efficiency. We note that several cost items such as facilities cost and travel overshot in the previous quarter and expect normalization of these costs. Net profit growth is muted due to lower other income following completion of buyback of Rs 16,000 crore,” added report.

ICICI Securities expect TCS constant currency (CC) revenue may grow 2% QoQ while US$ revenues may grow 3.2% QoQ to $4,739 million owing to cross currency benefit partly offset by a sustained softness in BFSI and retail. Rupee revenues may grow 2.9% QoQ to Rs 30,453 crore. EBIT margins may expand 130 bps QoQ to 24.6% led by absence of wage hike, visa cost and cross currency benefit.

Edelweiss Securities expect CC revenue growth of 0.7% QoQ and aided 90bps by cross currency (1.6% growth in USD terms). EBITDA margins expected to expand by 140bps QoQ on account of absence of wage hikes and visa costs.

At 02:37 PM; the stock was up 1.8% at Rs 2,504 on the BSE. On comparison, the S&P BSE Sensex was down 0.27%, while the sector S&P BSE IT index up marginally by 0.19%.

TATA Consultancy Services ( TCS )