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- 12 Jan 2024
- ICICI Securities
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MUTED TOPLINE GROWTH ON EXPECTED LINES, MARGIN IMPROVEMENT SURPRISE POSITIVELY
TCS - 3266 Change: -116.00 (-3.43 %)News: TCS reported revenue of US$ 7,281 mn up 1% QoQ & 2.9% YoY (up 1.7% YoY in CC terms) while in rupee terms the company reported growth of 1.5% QoQ & 4% YoY. Geography wise the growth was led by Europe reporting a growth of 8.1% YoY in CC terms while North America (53.7% of mix) declined by 3%. Vertical wise BFSI (33.1% of mix) declined by 3% YoY in CC terms while Energy, Resources & Utilities (ERU) and Manufacturing reported growth of 11.8% & 7% respectively. Adj. EBIT (excl. legal settlement claim) increased by 75 bps QoQ to 25% due to the tailwinds of operational efficiency (+60 bps), reduction in subcontractor costs (+70 bps) & currency benefits (+25 bps) mitigated by the headwinds of furloughs (-80 bps). The company’s net headcount during the quarter decreased by 5,680 to 603,305 while LTM attrition declined by 160 bps to 13.3%. The company declared dividend of Rs. 27 per share including special dividend of Rs. 18 per share.
Views: The company’s deal wins remain steady with TCV of US$8.1 bn in quarter (up 3.8% YoY) taking the total TCV to US$29.5 bn for YTD FY24. The company indicated that the pipeline remains strong & pipeline to TCV conversion is steady. The company’s margin improvement efforts are yielding results with the margin improving for second successive quarter from 23.2% in Q1FY24 to 25% in Q3FY24. The company maintained 26-28% of EBIT margin guidance in the medium term with the levers of increased productivity, utilization & lower sub-contractor cost. Nonetheless, company indicated that there was no significant changes in the macro environment with clients remaining cautious.
Impact: Neutral