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ICICI Securities Report
Tata Consultancy Services Ltd. reported revenue growth of 1.1% constant currency/2.2% USD – in line with our estimate of 1.5% CC/2.3% USD for Q2 FY25.
Growth was led by regional markets/banking, financial services and insurance, up 10.5%/1.9% QoQ USD. Retail and hi-tech saw some revival QoQ while healthcare saw weakness from client-specific headwinds.
Ebit margin, at 24.1%, was down 60 basis points QoQ due to:
higher subcontracting and project transition cost;
hiring; and
investment in infrastructure, software license.
Total contract value, at $8.6 billion, came in within management's comfort range of $7–9 billion. Management commentary had a positive tone and the pipeline is robust. Broadly, the parameters exhibit mixed signals versus Q1 FY25's more broad-based growth.
We adjust FY25E/FY26E EPS lower by 1–2% and retain Add with a Sep'25E target price of Rs 4,840 at 30 times Q5-Q8 earnings per share.
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