TCS shares: Should you buy/hold the IT stock after Q2 results?

Largest IT services exporter TCS on Monday reported an over 8% growth in its September quarter net profit at ₹10,431 crore. The reporting quarter saw an 18% jump in revenues to ₹55,309 crore as against ₹46,867 crore in the year-ago period, but it was a 1.60 percentage points narrowing in the operating margin to 24%.

What brokerages say on TCS shares

“Deal wins at $8.1 bn were steady YoY but high subcontracting with lower net hiring reflects management’s caution amidst an uncertain macro. We raise our FY23-25 estimates by 2-5% to factor INR depreciation against USD and expect TCS to deliver 12% EPS CAGR over FY22-24. TCS’ premium valuations may limit upside,” said global brokerage Jefferies while maintaining Hold rating on TCS shares with a revised target price of ₹3,180 apiece.

“TCS reported broadly inline quarterly performance. The USD reported revenue was impacted due to cross currency headwinds. There was sequential improvement in EBIT margin (up 91 bps QoQ) led by improving employee pyramid and other efficiency measures. Employee attrition remained high as LTM attrition increased by 180 bps QoQ to 21.5%,” said Yes Securities. The brokerage has changed its rating on the IT stock to Add from Buy with revised target price of ₹3,536 per share.

“TCS is seeing some caution for longer term deals and is experiencing some delayed decision making in Europe, but it continues to see a strong spending environment in the US. While we remain concerned about Q3 margin due to the timelines of cost optimization, supply situation easing out in 2HFY23 along with benefits from increased fresher additions in the last few quarters and lower sub-contractor costs should aid margins,” as per Motilal Oswal which has Buy tag with target price of ₹3,580.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.