Shares of Tata Consultancy Services (TCS) were trading flat in early trade ahead of IT major's Q1 earnings set to be announced today. The Tata Group firm is likely to report double-digit growth in terms of revenue and profit on a year-on-year basis in the last quarter.
The IT stock was down 0.26 per cent at Rs 3,278 in early trade against the previous close of Rs 3,286.95 on BSE. Market cap of the firm stood at Rs 11.99 lakh crore on BSE.
TCS stock trades higher than 5-day and 20-day moving averages but lower than 50-day, 100-day and 200-day moving averages.
The IT stock has risen 1.08 per cent in one year and fallen 12 per cent since the beginning of this year.
The share opened at Rs 3,297 against the previous close of Rs 3286.95. Total 7,314 shares of the firm changed hands amounting to a turnover of Rs 2.40 crore on BSE. The share hit a 52-week high of Rs 4,045.50 on January 18, 2022 and a 52-week low of Rs 3,023.35 on June 17, 2022.
TCS, which will kick-start the Q1 earnings season, is expected to post a single-digit increase in top-lineThe market and bottom-line on a quarter-on-quarter (QoQ) basis. It may also log a sequential dip in margin due to wage hikes and an increase in other expenses.
Kotak Institutional Equities expects revenue growth on a yearly basis to come in a range of 2-4.5 per cent for tier-1 and 3-5 per cent for mid-tier companies. Meanwhile, EBIT margins could fall 70-400 bps YoY.
Brokerage ICICI Securities expects revenue to grow 16.1 per cent YoY and 4.2 per cent on a QoQ basis. However, adjusted net profit is likely to rise 10.3 per cent YoY and 0.1 per cent QoQ. EBITDA margin may fall by 199 basis points on a YoY basis and 147 basis points on a QoQ basis, it added.
According to YES Securities, TCS is likely to post 17.1 per cent and 11.1 per cent YoY growth in revenue in Q1FY23. Revenue and profit after tax is likely to rise 5.1 per cent and 0.9 per cent, respectively, on a QoQ basis.
"Management commentary on outlook on growth environment would be a key thing to watch out for," YES Securities said in a report.
ICICI Securities has advised investors to stick to the bluechip stocks of the IT sector, considering the current business environment. "We re-iterate our underweight stance on India IT sector as we see peak revenue growth momentum behind us, and deal and hiring momentum will likely soften. We believe deployment in the sector should be very slow and gradual as there would be many unknown risks ahead that might further degrade valuations. With regards to these trends of IT spends, we suggest investors stick with bellwether stocks of the sector like TCS and Infosys," the brokerage said.
Another brokerage Motilal Oswal has trimmed its FY23 and FY24 EPS estimates for the IT sector by 2-5%, despite a positive 300-400 bps impact due to a fall in rupee.
According to Motilal Oswal, near-term pressure on valuations will continue as the worsening macro commentary is likely to impact industry deal flow and revenue over the next few quarters.
However, the financial services firm suggests investors should utilise any consequent correction to raise allocation to the sector.
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