Tata Consultancy Services Ltd. share price target

TCS Q1FY21 earnings were below our estimates on all fronts as Covid-19 pandemic disrupted the business performance of the company. Consolidated revenue stood at Rs 3,83,220 mn, below our estimate of Rs 3,95,458 mn, registering +0.4% YoY/-4.1% QoQ. Consolidated EBIT stood at Rs 90,480 mn, down by -1.9% YoY/-9.7% QoQ. On the margins front, EBIT margin contracted by 54bps YoY to 23.6% due to higher employee costs and depreciation expenses. Consolidated PAT saw a decline of 13.8% YoY to Rs 70,090 mn, vs 81,270 mn in Q1FY20 due to lower other...

We expect demand recovery from 2Q-3Q, supported by (1) strong digital playbook, (2) recovery in deal contracting with increase in consolidation deals (advantage Indian Tier-1s) as enterprises consolidate their tech portfolio, and (3) tech budget normalisation in 2Q for impacted verticals. Following -1.5/-6.0% QoQ in 4Q20/1Q21E, we have factored -0.6/+1.5/+2.8% QoQ in revenue over 2Q-4Q21E. The IT sector margin is expected to decline 95bps QoQ. Profitability is expected to be impacted by lower utilisation, pricing, cross-currency (GBP), lower forex gains and should be offset by (1) INR depreciation, (2) lower travel and discretionary spend, (3) deferral of wage increase and variable payouts cuts/deferrals, and (4) lower sub-contracting. We expect the margin trajectory to bottom out in 2Q. Subsequent margin recovery is premised on (1) demand recovery leading to utilisation recovery (onsite utilisation to precede offshore), and (2) continuity in optimal SG&A, including travel and sub-contracting rationalisation. IT sector (coverage universe) is expected to post -6.1/-3.7% QoQ/YoY in 1QFY21E revenue with cross-currency impact of -15 to -70bps QoQ. We expect Tier-1 IT revenue to decline between 5% and 9% QoQ while Tier-2 IT is expected to display a wider divergence (-2 to -14% QoQ). COVID-related economic impact on sectors like travel and transportation, O&G;, retail & CPG (discretionary) will be accentuated in 1Q (dual impact of price/volume cuts and deal deferrals/cancellations), while BFSI, healthcare, retail & CPG (non-disc.) and hi-tech verticals will be more resilient (deal-deferral impact, but resilient on pricing/volume).

Global 5G rollout is estimated to offer a mega US$ 10bn business opportunity for Indian IT players.

In terms of order book, co have the highest TCV in signed deals this quarter. The overall order book signed in the quarter was at $8.9 billion and BFSI stood at about $2.4 billion, while Retail was $3.1 billion, which includes the $1.7 billion of the Walgreens deal that was announced earlier. In both cases, these are the highest ever figures. TCV from deals signed in North America as a region stood at $5.3 billion. TCS is a IT solution provider. Company offers a consulting led integerated portfolio of IT & IT enabled services delivered through its unique global network delivery...

Tata Consultancy Services (TCS) Flat revenue on QoQ basis as core BFSI report lower sales, in line with the estimates Tata Consultancy Services (TCS) for the quarter ended Mar 2020 reported a consolidated revenue of Rs 39946 crore, a flat growth (up 0%) compared to sequential previous quarter ended Dec 2019 revenue of Rs 39854 crore. Flat growth in revenue is largely due to 2%QoQ fall in BFSI revenue, which roughly accounts for about 38% of the reported revenue. Lower BFSI revenue was due to continuation of slowdown as well as delay in shifting to remote working in...

We continue to believe that TCS' trinity of growth-scale-durability is challenged as risks to large deal ramp-up and cut in discretionary spend have increased. While TCS' supply metrics are resilient, demand dent is overwhelming with a deeper NorthAm/BFS impact and limited exposure to higher velocity verticals. Gains arising out of vendor consolidation/market-share, pipeline conversion and new business opportunities (accelerated cloud migration, remote solution & cybersecurity) will be offset by cuts to IT budgets, we've factored 6.1/8.5% decline in FY21 Rev/PAT. Valuations at 19.4x FY22E is in-line with its 10-yr avg. We maintain REDUCE on TCS following a miss on rev and slightly better operating performance. Demand-related factors to worsen while supply constraints are expected to recover ahead. The parallels to GFC are apparent (similar trajectory expected in 1HFY21), although this will be more broad-based. TCS estimation of recovery in 3Q-4QFY21 is a steep ask in context of 1HFY21 decline, but premised on its order-book and pipeline. Our TP of Rs 1,680, is based on 19x FY22E EPS (~5% cut in EPS est).

Despite only a partial impact in the last two weeks of March, Covid-19 fuelled 1.2% QoQ CC revenue contraction at TCS in Q4FY20, missing consensus estimates.

TCS: Prelude to darker Q1FY21. Oil & Gas: Q4FY20 Preview Pressure on cyclical earnings.

Tata Consultancy Services (TCS) reported a poor set of Q4FY20 numbers on the back of challenges posed by Covid-19. Revenues across geographies declined QoQ. Vertical wise, revenue declined in BFSI, retail and manufacturing. The decline in BFSI was due to supply side challenges and lower client approval on work from home. On the deal front, TCS won TCV worth US$8.9 billion in this quarter on the back of two large deals won in...

TCS's Q4FY20 revenue decline of 2.5% QoQ in US$ was a miss. However, EBIT margin remained resilient at 25.1%, +7bps QoQ and inline with our forecast. As a result, EPS of Rs21.5, -0.8%/-0.9% QoQ/YoY was in-line with our forecast. In Q4, TCS has secured deals with TCV of US$8.9 bn (a new high) taking the TCV for FY20 to US$26.9 bn. TCS believes that the worst as regards the impact of Covid-19 pandemic is yet to come. It expects the peak impact in Q1FY21, however, given its deal wins and pipeline it expects its performance to improve in H2FY21. We factor Q4FY20 miss and cut FY21E/22E revenue (US$) by 2.8%/2.6% and EPS by...