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On Wednesday’s trading session, Tata Consultancy Services’ share price rose marginally ahead of the company’s Q1FY23 (April-June) quarter results. The IT industry behemoth is expected to have a disappointing quarter, mirroring the overall lackluster sector performance, which was hampered by slower deal pipeline conversion, which impacted volumes in a seasonally strong quarter. TCS shares opened at 3,275.15 on the BSE.
Along with the financial data, the company’s board of directors will meet today to debate the distribution of an interim dividend to equity shareholders.
According to brokerage company Motilal Oswal Financial Services, the IT major is projected to report a 0.7% QoQ growth in revenue to 59,600 crores in Q1FY24, but a 4.6% sequential drop in net profit to 10,900 crores.
The full-quarter impact of pay increases and decreased utilisation as a result of project cancellations and postponements in Q1FY24 is expected to have an impact on the company’s margins.
EBIT is predicted to dip to 13,800 crores, while EBIT margin is expected to fall to 23.1% from 24.5% in the previous quarter.
Today, investors will be watching TCS’ projected margins, management commentary on the demand environment across regions, an update on projects that have been delayed, postponed, or cancelled due to macro uncertainties, and TCS’ hiring strategy in the face of slowing growth and macro uncertainties.
Despite reporting consolidated net profit growth of 5.03% quarter over quarter to 11,392 crore and consolidated revenue from operations growth of 1.6% quarter over quarter to 59,162 crore, the business missed market projections for the three months ended March 2023. Furthermore, the operating margin remained unchanged at 24.5%, while the net margin was 19.3%.
According to trendline data, the stock price grew 4.9% in the last year while underperforming its sector by 4.6%.
Tata Consultancy Services Project
“TCS and HCL Tech officially lit the ceremonial starters pistol for the first quarter earnings season.” Investors will keep a close eye on the overall demand picture in the tech sector. Earnings for the June quarter are projected to be lower than predicted due to an uncertain global climate and a slowdown in client discretionary expenditure.
On the charts, it appears to be feeble. Tata Consultancy Services may test below 3200, while Infosys may test below 1280. For HCL Tech, it appears that poor results have already been factored into the price action, and it may test below 1100 ahead of results expectations. “We remain neutral to negative on IT stocks for Q1 results,” said Prashanth Tapse, Senior Vice President of Research at Mehta Equities.
According to Ruchit Jain, Lead Research Analyst at 5paisa, large-size IT stocks have been consolidating in the recent quarter due to poor results announcements.
“At this point, investors will be looking for cues from the results that will be announced soon, and any positive surprise in terms of better-than-expected numbers or good guidance could lead to a catch-up move in the large-cap IT names.” “We advise investors to wait for the results before taking a stock-specific approach,” Jain added.