TCS Share Price Update: Tata Consultancy Services (TCS), one of India’s leading IT firms, recently unveiled its Q2 results for the fiscal year 2024. Investors are closely monitoring TCS shares in light of these results, which highlight ongoing cautious trends in the market. The company’s net profit exhibited a modest year-on-year (YoY) increase of 5% during the July to September quarter. Additionally, TCS recorded an impressive revenue growth of approximately 8%, despite a slight contraction in its operating margins compared to the previous year.
Market Sentiment Following TCS Q2 Results
According to market analysts, despite TCS’s results falling short of market expectations for Q2 FY24, the company achieved an increase in its employee headcount. Experts are optimistic about the potential impact of the US Federal Reserve’s easing monetary policy on Indian IT companies, including TCS. They have placed a ‘buy’ rating on TCS shares, with predictions pointing towards a short-term price target of ₹4,500 per share.
Analyst Insights on TCS Performance
Sanjeev Hota, Head of Research at Sharekhan by BNP Paribas, provided an assessment of TCS’s Q2 results, stating, “The company delivered a weaker set of figures, with both revenue and margins missing our estimates. The TCV (Total Contract Value) wins of USD 8.6 billion fell short of expectations, especially when considering the 8-quarter average of around USD 9.6 billion. However, a positive takeaway is the 0.9% sequential growth in employee counts and a notable 1.9% QoQ growth in the BFSI (Banking, Financial Services, and Insurance) vertical on a USD basis. Looking ahead, the easing cycle from the US Fed and stable macroeconomic indicators support a recovery narrative for TCS and the broader IT sector into FY25 and FY26, leading to our ‘Buy’ recommendation.”
Financial Highlights and Dividend Announcement
In its Q2 FY25 results, TCS reported a net profit of ₹11,909 crore, reflecting a 1.1% decrease QoQ, which was below analysts’ forecasts. The company recorded a 2.6% QoQ rise in revenue, bringing total revenue to ₹64,259 crore, compared to ₹62,613 crore in the previous quarter. The EBIT margin also dipped to 24.1%, down from 24.7% last quarter. TCS declared a second interim dividend of ₹10 per share, with a record date set for October 18, 2024. The order book saw a modest uptick, with the total contract value at $8.6 billion in Q2, up from $8.3 billion in Q1 FY25. Notably, TCS opted to cancel its post-earnings press conference and interviews due to the recent passing of Ratan Tata.
TCS Share Price Forecast
Exploring the outlook for TCS shares, Sumeet Bagadia, Executive Director at Choice Broking, suggested that TCS shareholders should consider holding their positions. He recommended maintaining a stop loss at ₹4,100. If the share price holds above this level, Bagadia indicated that investors could add to their holdings for a near-term target between ₹4,400 and ₹4,500. He also encouraged new investors to adopt a buy-on-dips strategy, with the same stop loss target in place.
Conclusion: Evaluating TCS’s Performance
In summary, TCS remains a key player in the Indian IT landscape despite facing hurdles in revenue growth and margin contractions. Notably, sectors like cybersecurity, artificial intelligence, cloud computing, and TCS Interactive have contributed positively to their growth in the most recent quarter. The current market sentiment suggests that while TCS has navigated some challenges, strategic recommendations and underlying industry opportunities may still hold promise for investors.
Disclaimer: The views and recommendations expressed in this analysis are those of individual analysts or brokerage firms, not representative of any official stance. Investors are advised to consult certified financial advisors before making investment decisions, as market conditions are dynamic and individual circumstances can vary significantly.
