TCS Q1 results preview: Stock rallies 15% YTD; analysts expect 25% profit growth in Apr-Jun quarter

TCS share price fell 0.4 per cent to Rs 3,262 apiece after rising over half a per cent in the opening trade on Thursday, ahead of April-June quarter results of FY22. Analysts expect Tata Consultancy Services to post a 25 per cent on-year and 5 per cent sequential growth in net profit. At least three research and brokerage firms — JM Financial Institutional Securities, HDFC Securities Institutional Equities and Nirmal Bang — have upgraded TCS share target price to Rs 3,750 apiece, up 15%. TCS stock hit an all-time high of Rs 3,399 apiece on 25 June 2021. The stock rallied 60 per cent in the past year and gained 14.5 per cent so far in 2021. In the volume traded terms, 43,000 shares have exchanged hands on BSE and a total of 9.6 lakh units on NSE, so far in the trade.

Here’s what top brokerages expect from TCS Q1FY22 earnings

JM Financial Institutional Securities: The brokerage firm has revised up the TCS target price to Rs 3,300 apiece. It expects a 3 per cent sequential growth in constant currency, and 30 bps of cross currency tailwinds. The firm believes that despite the FY22 wage increments rollout from April 2021, EBIT margin decline is expected to be limited to 110 bps, due to slight rupee depreciation and growth leverage. The key things to watch out for today include large deal TCV, outlook on client spending trends and pricing trends, levers to defend or improve margins in the backdrop of certain supply side concerns.

Motilal Oswal Financial Services: It has a neutral rating to the stock with a TP at Rs 3,450, an upside of 5.3 per cent from previous close. It expects strong growth, led by a ramp up in large deal wins in 4QFY21, and robust TCV led by continued momentum in deal wins. It also sees a decline in sequential margin on account of wage hike during 1QFY22. While sector demand outlook and margin impact from large captive deals would remain in focus.

HDFC Securities Institutional Equities: It has an add rating to the stock with a price target at Rs 3,750 apiece, a rally of 15 per cent from Wednesday’s close. Deal wins such as TCS-Proximus remained strong in the first quarter of the current fiscal. The research firm expects 3.6 per cent sequential growth in TCS supported by uptick in deals.

Nirmal Bang Institutional Equities: The brokerage firm has revised the target price of the stock upwards to Rs 3,663 from an earlier target price of Rs 3,165 apiece. It has maintained an accumulate rating to the stock. TCS continues to be Nirmal Bang’s sector benchmark as it believes TCS to be best positioned in the industry. “We believe the uniformly strong growth seen across both large-sized and mid-sized players is probably a 12-24 month phenomenon and there is likely to be greater disparity after that and our valuation discounts to TCS partly reflect that,” the brokerage firm said.

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