TCS Q4 Results Review - Mega Deal Wins, Margin Expansion Key Positive: IDBI Capital

IDBI Capital Report

Tata Consultancy Services Ltd. Q4 FY24 profit numbers were above consensus estimates. While the macro is uncertain, TCS continues to win cost optimisation, vendor consolidation and growth and transformation deal.

The company has also won mega deals which is expected to ramp up in FY25E. We believe mega deals will contribute ~3% to company’s topline.

The company’s order book for Q4 and FY24 stood at $13.2 billion (1.8 times books to bill) and 42.7 billion (1.5 times book to bill). This coupled with improvement in banking, financial services and insurance, traction in Gen AI, Cloud modernisation, ERP modernisation will lead to tailwind in revenue and margins. Hence, we have upgraded our earnings per share estimates by 0.8% and 3.7% for FY25E and FY26E.

This has prompted us to revise target price upwards from Rs 4,000 to Rs. 4,300 (26 times FY26E EPS). However, considering the recent run up in price we maintain our Hold rating on the stock.

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