Tata Consultancy Services - Mixed results, commentary suggests | DM Stocks

Tata Consultancy Services - Mixed results, commentary suggests moderation in growth

TCS reported a mixed set of results with beat on revenue, while margins and headcount addition were below expectation. Revenue in constant currency (CC) was up 2.3% QoQ in 3QFY23, better than our expectation of 1.8%. Growth was broad-based across verticals. Deal wins have been a tad lower at USD 7.8 bn vs. ~USD 8.4 bn for an average of the past few quarters. However, deal wins were in line with the management's guidance of a TCV run-rate of USD 7-9 bn per quarter. Overall, commentary suggests some moderation in growth momentum with increasing number of cost initiative deals and no significant acceleration in cloud transformation deals. Margin came in a tad lower than expectation at 24.5%, however, increased 50 bps QoQ aided by INR depreciation and operational efficiency. We cut our TP to INR 3,600 (from INR 3,700) as we marginally lower our CC growth forecast and margin assumptions. We also cut our rating to HOLD from BUY on lack of an upside.