Given its size, order book, and exposure to long-duration orders and portfolio, TCS is well positioned to grow over the medium term. Owing to its steadfast market leadership position and best-in-class execution, the company has been able to sustain its industry-leading margin and demonstrate superior return ratios.
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Motilal Oswal Report
Tata Consultancy Services Ltd. reported revenue of $7.4 billion in Q1 FY26, down 0.6% QoQ in USD terms vs our estimate of 1.2% growth. Growth was led by Hi-Tech/Manufacturing (up 3.1%/3.0% QoQ). BFSI/Energy and Utilities grew ~2.0%/2.9% QoQ in USD terms.
India was down 31% QoQ (in USD terms). Ex-India business was also down 0.5% QoQ in CC terms, missing estimates. Ebit margin was 24.5% (up 30bp QoQ), above our estimate of 24.2%. PAT was up 4% QoQ/6% YoY at Rs 128 billion (in-line with our estimate of Rs 125 billion).
For Q1 FY26, revenue/Ebit/PAT grew 1.3%/0.5%/6.0% YoY in INR terms. We expect revenue/Ebit/PAT to grow by 1.4%/4.1%/7.0% YoY in Q2 FY26. TCS reported a deal total contract value of $9.4 billion, up 13.3% YoY. The book-to-bill ratio was stable at 1.3x.
Growth for TCS remains elusive. That said, sequentially the headwind from the BSNL ramp-down is now manageable, and there is enough slack in the pyramid to drive margin gains through the year.
Valuations are undemanding, and we reiterate our Buy rating on TCS with a target price of Rs 3,850, implying a 14% potential upside.
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