TCS Q4 Results Review— Demand Environment Largely Status Quo, Says Dolat Capital, Revises Rating To Accumulate

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Dolat Capital Report

Tata Consultancy Services Ltd. reported constant currency revenue decline of 0.8% QoQ, (below our estimate of +0.4%), due to unwinding of BSNL deal and certain project delays. Net impact of selective promotions, capability investments, productivity/ realization gains and Forex led to margin dip of 28 bps QoQ, leading to operating profit margin of 24.2% (out estimate: 25.4%).

Despite uncertainty from tariff related disruption in macro environment, TCS remains optimistic about achieving better growth in FY26E supported by healthy total contract value wins, (Q4: $12.2 billion, but trailing twelve months down 8% YoY), client interactions and pipeline.

Noting mixed signals of weak macros and cautiously optimistic commentary along with limited margin levers, we have lowered our FY26E/FY27E earnings estimates by 3.4%/4.7%. Despite this, the recent broad market corrections have turned valuations favorable inline with long term mean and thus we revise to ‘Accumulate’ rating with target price of Rs 3,760 valued at 24 times on FY27E (implies ~3x PEG).

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