Infosys, TCS Q3 Results Review - Inline Performance: HDFC Securities

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..HDFC Securities Institutional Equities .TCS - Path to recovery Tata Consultancy Services Ltd. delivered in-line revenue growth and stronger operating performance in Q3. Key positives for TCS included-growth visibility from mega deals (Q3/Q4 sequential improvement from BSNL deal and JLR deal) and deal market-share gains versus Accenture outsourcing, offsetting the impact of leakage in the renewals,commentary on recovery in Europe geography and banking, financial services and insurance vertical (sequential growth even in Q3 adjusted for impact of large program completion), supported by 16% YoY in BFSI total contract value for nine months-FY24, vendor consolidation deals plus sequential improvement in qualified pipeline and strongest book-to-bill in retail and consumer packaged goods vertical in over a year, andmargin improvement and continued scope for improvement aided by declining attrition (within comfort range), sub-con optimisation and higher scope for utilisation (13% growth in learning hours). Our target price of Rs 4,040 is based on 26 times FY26E earnings per share (five year/10Y average at 26 times and 23 times)..Infosys - Near-term upside capped Infosys Ltd. delivered in-line performance (above consensus) while underperforming TCS sequentially and for FY24E growth.The cut/narrowed guidance implies only marginal growth at the top-end in Q4 despite the benefit from the Liberty Global deal ramp-up and normalisation of the McCamish impact. The relative weakness is emanating from- a higher mix of discretionary services in Infosys’ portfolio with slower activity on digital programs, a steep decline in Top 11-25 accounts and pressure on renewals (sub-$1 billion large deal renewal total contract value as compared to $1.5 billion quarterly average),extended furlough impact in Q4 and increased competition from captives, andattrition in senior management to competition. Revenue guidance for FY24E was tweaked to 1.5 to 2% CC (1 to 2.5% earlier) and margin guidance was maintained. The improving trajectory beyond FY24 is premised on-benefits from project ‘Maximus’ driving margin improvement – utilisation, pricing, pyramid, delivery efficiency,new deal wins around cost optimisation, SAP cloud, and relative strength in manufacturing and energy and utilities verticals (28% of revenue). Near-term upside potential is capped especially if macro recovery is protracted. Maintain 'Add' on Infosys with target price of 1,515 based on 20 times FY26E EPS..Click on the attachment to read the full report:.TCS Q3 Results Review - Inline Operating Performance; Deal Booking Robust At $8.1 Billion: Yes Securities.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Infosys, TCS Q3 Results Review - Inline Performance: HDFC Securities

Infosys delivered in-line performance (above consensus) while underperforming TCS sequentially and for FY24E growth.

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