TCS Q4 results: What should you know?

Kicking off the Q4 earnings season for India equity markets, Tata Consultancy Services reported robust results, reporting a 17% jump in revenue to Rs 59,162 crore and a 15% rise in net profit of Rs 11,392 crore.

TCS is leading the way in releasing its quarterly financial results before its competitors, which is significant as the industry is currently facing a recession in its primary markets, the U.S. and Europe, as well as upheaval in the U.S. banking industry. 

TCS Q4 Results: Key Insights 

• Revenue: Revenue from operations rose about 17% led by a strong jump in the company’s order book which won $10 billion worth of new orders during the quarter.
• Profits: The company reported a profit of Rs 11,392 crore, on account of multiple deals and steady demand for its services coupled with steady costing.
• Margins: Operating Margin at 24.1% and Net Profit Margins were at 18.7% during the quarter that ended March 2023. 

TCS Share Price:  Historical Performance

TCS share price has gained 2% so far this year and 0.5% in the fourth quarter period. Technology shares have been beaten down over the past full year on account of constant interest rate hikes in the US and rising recession fears globally.  

TCS is exceptionally susceptible to international macroeconomic changes as more than 50% of its income comes from the US which has led to recent weakness in the stock.  

TCS Revenue: 

• Revenue from operations rose about 17% to nearly Rs 60,000 crores led by a strong jump in the company’s order book by fresh $10 billion worth of orders during the quarter. The revenues also beat analyst expectations. 
• According to the company, revenue growth was driven by North America which accounts for nearly 53% of the revenues followed by a 16% contribution from the UK. 
• The order book for the quarter stood at $10 billion with the total FY23 order book TCV (total contract value) coming in at $34 billion. 

TCS Segment-Wise Revenue:  

Growth was led by Healthcare which grew by 29%, Banking grew by 16%, and the manufacturing vertical rose by 12%. Other Segments such as retail and media rose 19% and 14% each.  

TCS Geography Wise Revenue:  

All Industry Verticals Grow Mid to High Teens. Among major markets, North America continued to be the company’s top customer base accounting for 53% of its total revenue. The UK contributed 16% while the rest of Europe contributed 15%. Other countries included Latin America, Asia Pacific, India, and the Middle East.  

TCS Profits:  

The IT major's Q4 net profit was up 14.8% at Rs 11,436 crore, on the back of robust revenue growth as the company reaped the benefits of $10 billion in fresh service orders booked during the quarter. 

TCS dividend: 

The company released a dividend of Rs 24 per share. 

TCS attrition rate:

During the year, the company onboarded over 44,000 freshers and also recruited the highest-ever number of experienced professionals.

The company's headcount increased by 22,600 people in FY23 and the total headcount stood at 6,14,795, including net addition of 821 employees in Q4FY23. The total attrition rate over the past 12 months was 20.1%. 

TCS Q4FY23: Analyst View

• JP Morgan has an ‘underweight’ rating on TCS and a share price target of Rs 2,700. The brokerage felt demand for the company's services is weak with no visibility on turnaround.
• Morgan Stanley has on ‘equal weight’ rating on TCS and a share price target of Rs 3,350. Uncertain near-term outlook in North American markets drove the weak ratings. 
• Nomura has a ‘reduce’ rating on TCS and a share price target of Rs 2,830. The brokerage felt heightened macroeconomic volatility might delay the recovery in the US across verticals, while the outlook is improving in continental Europe.
• IDBI Capital Markets has a ‘hold’ rating on the company and a share price target of Rs 3,409, implying a 5% premium over the stock's previous closing price. The brokerage believes that even as TCS' deal pipeline remains healthy (US$34 billion, book to bill of 1.2x) with medium tenure deals, near term macro challenges & slowdown in discretionary spend will slowdown revenue growth.
• Motilal Oswal reiterated its ‘buy’ call on the stock with a share price target of Rs 3,860, implying a 19% rise from its previous closing price. The brokerage house in a report revealed that revenue were affected by a slowdown in the BFSI vertical in the second half of the quarter and the company also indicated a demand slowdown in key verticals, primarily in discretionary spends, while cost efficiency spend remained robust.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.