TCS Q3 Results Review - Mixed Bag; Better CY25 Outlook But Lacks Punch; 'Reduce' Says Dolat Capital

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Dolat Capital Report

Tata Consultancy Services Ltd. reported constant currency revenue growth of 0.2% QoQ, (below our estimate of 0.8%), which reflected the impact of seasonal furloughs and an unchanged macro environment.

Due to improving utilisation and operational efficiency, operating profit margin was up by 41 bps QoQ at 24.5% (our estimate: 24.1%). Management expects CY25 to be better than CY24, however client budgeting to remain flat with a positive bias, suggesting moderate growth recovery.

We largely retain our FY25E/FY26E/FY27E earnings estimates, noting weak revenue growth. Maintain ‘Reduce’ rating with target price of Rs 4,270 at 26 times on FY27E (implies ~3x PEG).

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