TCS rises 2% ahead of Q3 results. Here’s what analysts say

Shares of TCS advanced 2 per cent ahead of the IT firm’s December quarter results scheduled for later in the day.

The stock rose 2.16 per cent to hit a high of Rs 3,098.35 on BSE.

On YoY basis, Nirmal Bang projects TCS reporting 2.6 per cent growth in revenues at Rs 40,900 crore. Ebit is seen rising 5.1 per cent YoY to Rs 10,477 crore. Profit is seen at Rs 8,630 crore, up 6.3 per cent. Margin is seen expanding to 25.6 per cent from 25 per cent YoY.

Edelweiss expects TCS to report about 4.5-5 per cent growth in dollar revenue and 4 per cent expansion in constant currency (CC) growth — all this on a sequential basis.

This is because the company is seen as a key beneficiary of core transformation, higher cloud adoption and digital adoption. It is also seen as a direct beneficiary of the persistent market share loss of key players such as Capgemini and Cognizant.

Antique Stock Broking sees sequential constant currency growth of 3 per cent and dollar revenue growth at 3.3 per cent, with a cross-currency tailwind of 30 basis points.

“We expect the BFSI vertical to report decent growth led by strong momentum in retail banking and mortgage sub-verticals; life sciences and healthcare verticals should continue to witness strong growth. We expect margin contraction of 120 bps QoQ largely led by the negative impact of salary hike that took effect from October 1, 2020; which will be partially offset by operational efficiency,” it said.

Antique said the Ebit margin may fall 120 basis points to 25 per cent sequentially from 26.2 per cent in the September quarter. This is largely on account of salary hikes.

Analysts said investors would watch out for total contract value (TCV) for the quarter, deal momentum, tenure and pricing. A commentary — particularly on retail, travel and product engineering services verticals — will be keenly watched, they said.