TCS Q3 Review - Underwhelming Print In A Furlough Quarter; Retain 'Buy' On Positive Outlook: ICICI Securities

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ICICI Securities Report

Tata Consultancy Services Ltd. reported revenue contraction of 1.7% QoQ USD/ flat growth constant currency, miss on I-Sec estimates in a furlough quarter (Q3 FY25).

Growth was impacted by weakness in lifesciences, manufacturing, communication and BSNL deal rampdown. Management acknowledged early signs of discretionary spend recovery, incrementally positive to previous quarter, especially for BFSI, retail, hi-tech and revival of macroeconomic indicators in North America, echoed by broadbased total contract value of $10.2 billion.

Deal pipeline is strong with mega deals in the funnel and efforts are underway to backfill BSNL deal phase-out. TCS is trading at 6% discount to NIFTY IT versus five-year avg. premium of 14.2%, making valuations attractive.

Retain Buy on positive outlook on an unchanged 12 months forward multiple of 31 times on Q3 FY26E-Q2FY27E EPS of Rs 154 with a target price of Rs 4,770.

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