|Result Analysis: Tata Consultancy Services Ltd.(CMP: Rs.3242.10)||Result Update: Q4FY23|
Tata Consultancy Services is the largest IT Company in India and the global leader in IT services, consulting and business solutions with an extensive global network. The company offers a consulting-led, cognitive powered, integrated portfolio of business, technology and engineering services and solutions. It provides services to industries such as BFSI, manufacturing, telecommunications, retail and transportation. The company serves to the world’s biggest conglomerates like Google, Amazon, Apple, IBM, Bosch, Adobe etc.
|Market Cap. (Cr.)||1186301|
|52 Wk. high/low||3739 / 2926|
|Book Value (Rs)||265|
|Sector||IT – Software|
TCS reported marginal increase of 1.6% on sequential basis in the revenues to Rs.59,162 cr. and Net profits increase of 5.1% QoQ to Rs.11,436 cr. in the last quarter of FY23.
The earnings were below the broader street expectations; soft earnings growth was mainly due to the pause in discretionary spending of the consumers.
EBIT of the company grew by only 1.4% QoQ in the quarter and EBIT margin remained flat at 24.5% comparing to previous quarter.
All industries showed slow pace of growth range of 0.9% to 3.9% on quarterly basis. Major contributing segment i.e. BFSI only grew by 2.2% QoQ due to the negative sentiments present in the US and Europe region in BFSI sector. Communication, Media & Technology segment showed negative growth on QoQ basis due to the lower discretionary spending.
Major markets i.e. North America and Europe showed growth in the quarter while India and Asia pacific showed slighter degrowth.
Order book of TCS is at record high of $10 billion in Q4, relatively strong on QoQ basis, but has decreased 11.5% YoY.
Attrition rate dropped to 20.1% vs 21.3% of previous quarter, co. added 821 employees during Q4 taking total headcount to 6,14,795.
Board of the company approved a final dividend of Rs.24/share for the last quarter.
In the concall, management highlighted the demand softness in North America region, UK remains robust while Europe is seeing bounce back in demand.
|Promoters & Group||72.30|
Commenting on March quarter results, Rajesh Gopinathan, CEO and MD said, “It is very satisfying to look back at our strong growth in FY 2023, on top of the mid-teen growth in the prior year. The strength of our order book demonstrates the resilience of demand for our services and gives us visibility for growth in the medium term.”
Samir Seksaria, CFO, said, “FY 23 was a year of transition, as supply-side challenges abated while pandemic-depressed travel and discretionary spends normalized. We navigated this change well and our longer term competitiveness remains intact, giving us industry-leading profitability even as we pursue our growth aspirations.”
TCS reported slightly below estimated earnings in Q4FY23 result majorly due to the slowdown in discretionary projects in America and Europe region. Due to negative sentiment in BFSI segment several projects were put on hold or postponed. Overall this segment remains watchful with short to medium term view due to the prevailing macro situation. Margins of the company also impacted due to the subdued revenue growth. With higher focus on the cost optimization, TCV of the company remains robust with medium term deals. Looking at the macro environment, near to medium term path for the company remains cautious as of now. However, we remain positive on the TCS with longer term perspective.
|Particulars (In Rs. Cr.)||Q4FY23||Q3FY23||Q4FY22||QoQ%||YoY%||FY23||FY22||YoY%|
|Revenue from Operations||59,162||58,229||50,591||1.6%||16.9%||2,25,458||1,91,754||17.6%|
|Employee Benefit Expenses||33,687||32,467||28,353||3.8%||18.8%||1,27,522||1,07,554||18.6%|
|Employee benefit Expenses as % of Sales||56.9%||55.8%||56.0%||110 bps||90 bps||56.56%||56.09%||47 bps|
|Cost of Equipment & Software Licences||620||643||260||-3.6%||138.5%||1,881||1,163||61.7%|
|Depreciation & Amortisation Expense||1,286||1,269||1,217||1.3%||5.7%||5,022||4,604||9.1%|
|EBIT Margin||24.5%||24.5%||25.0%||–||-50 bps||24.1%||25.3%||-120 bps|
|Profit After Tax (PAT)||11,436||10,883||9,959||5.1%||14.8%||42,303||38,449||10.0%|
|PATM (%)||19.3%||18.7%||19.7%||60 bps||-40 bps||18.8%||20.1%||-130 bps|
|EPS (in Rs.)||31.14||29.64||26.85||5.1%||16.0%||115.19||103.62||11.2%|
|Segment Revenue (In Rs. Cr.)||Q4FY23||Q3FY23||Q4FY22||QoQ%||YoY%||FY23||FY22||YoY%|
|Retail and – Consumer Business||9,773||9,661||8,209||1.2%||19.1%||37,506||30,715||22.1%|
|Communication, Media and Technology||9,696||9,753||8,475||-0.6%||14.4%||37,653||31,874||18.1%|
|Life Sciences and Healthcare||6,585||6,354||5,416||3.6%||21.6%||24,605||20,462||20.2%|
|Geography Revenue %||Q4FY23||Q4FY22||YoY||FY23||FY22||YoY|
|North America||52.4||51.6||80 bps||53.4||50.5||290 bps|
|Latin America||1.8||1.7||10 bps||1.8||1.7||10 bps|
|UK||15.7||15.6||10 bps||15.0||15.9||-90 bps|
|Continental Europe||15.1||15.5||40 bps||14.9||16.0||-110 bps|
|Asia Pacific||8.0||8.5||-50 bps||8.0||8.8||-80 bps|
|India||5.0||5.1||-10 bps||5.0||5.1||-10 bps|
Source: Company website, EWL Research
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