TCS Q4 results preview: Profit may grow 14-19%; order wins likely in $8.5-10 billion range

IT bellwether Tata Consultancy Services (TCS) is likely to report a 14-19 per cent year-on-year (YoY) rise in net profit for the March quarter on a 17-18 per cent growth in sales. Ebit margins are seen expanding and coming in excess of 25 per cent while order wins are likely in the $8.5-10 billion range. Analysts expect a cautious management commentary on client spending, given delays in decision-making. The Street would be keenly following any commentary on BFSI and Hi-tech verticals to gauge where the growth may take a hit in the near-term.

Kotak Institutional Equities expects TCS to lead Tier 1 IT pack on growth, led by cost take-outs, wallet share/vendor consolidation gains and strong spending on cloud and digital programs. Exposure to impacted banking clients will not materially impact revenue growth in the quarter, the brokerage said.

Antique Stock Broking said TCS may report a 14.5 per cent YoY rise in net profit at Rs 11,366 crore in the March quarter compared with Rs 10,846 crore in the year-ago quarter. Nuvama sees profit for TCS climbing 18.6 per cent YoY to Rs 11,769 crore. HDFC Institutional Equities pegs Q4 profit for the IT major at Rs 11,227 crore.

Nirmal Bang Institutional Equities sees profit for TCS rising 14.6 per cent YoY against a 12.7 per cent growth for Infosys, 9.3 per cent growth for HCL Tech and flat growth for Wipro.

In terms of revenues, Antique Stock Broking sees TCS' top line growing 17.1 per cent YoY to Rs 59,263 crore compared with Rs 58,229 crore in the year-ago quarter. Motilal Oswal expects TCS to report 17 per cent YoY jump in revenues at Rs 59,200 crore. It sees revenue for TCS growing 7.6 per cent YoY (1.8 per cent QoQ) to $7,202 million in dollar terms. In CC terms, revenue growth is likely to be at 0.9 per cent QoQ, implying 90 bps currency tailwind, the domestic brokerage said

In terms of revenue growth in CC terms, Nuvama Institutional Equities sees TCS reporting 1.4 per cent sequential growth, which would be highest among its peers. The same brokerage expects Infosys' CC revenue growth at 0.2 per cent, HCL Technologies' at 1.6 per cent, Wipro's de-growth at 0.2 per cent and Tech Mahindra's de-growth at 0.6 per cent on a sequential basis.

Analysts largely see TCS' Ebit margin in 25-25.1 per cent range, an expansion of at least 50 basis points sequentially. This is against 11.9-21.3 per cent Ebit margins for IT peers. Order wins are seen at $8.5-10 billion.

The IT major may recommend a final dividend for FY23 today. The company board would recommend the dividend for the approval of the shareholders at the ensuing 28th Annual General Meeting. ICICI Securities, meanwhile, is expecting TCS to announce share buyback amounting to Rs 20,000 crore, as its last buyback (Rs 18,000 crore) concluded in the December quarter at a price of Rs 4,500 per share. If announced, it would provide technical support to the stock price in the current uncertain environment, the brokerage said.

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