Emkay Global Financial’s analysis of TCS reveals a slightly better-than-expected operating performance in Q1. The company reported a 1.9% quarter-on-quarter revenue growth (2.2% on constant currency basis) to USD 7.51 billion, supported significantly by higher revenue from the BSNL deal. However, EBITM declined by 130 basis points quarter-on-quarter to 24.7% due to a wage hike.
Despite healthy deal wins amounting to USD 8.3 billion and a promising pipeline, management refrained from predicting sustained growth due to uncertainties in discretionary spending and client project deferrals amid macroeconomic unpredictability.
Outlook:
Management anticipates FY25 revenue growth to outpace FY24. Emkay Global Financial maintains its earnings projections for FY24-27E and recommends reducing holdings in TCS, with a target price set at Rs 3950 per share, based on a 25x multiple of June 2025 estimated earnings per share.
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