Should you buy, sell or hold TCS shares after Q4 results?

Shares of IT bellwether Tata Consultancy Services (TCS) rose over 1% in an otherwise weak broader market on Monday as investors cheered the better-than-expected earnings report of the index heavyweight and its promising outlook for the financial year 2024-25. Top brokerages have largely maintained their bullish stance on the IT major, expecting the country’s largest software exporter to be among the fastest growing large cap companies.

Reacting to Q4 numbers, shares of TCS opened marginally lower at ₹3,995 against Friday’s closing price of ₹4,000.30 on the BSE, in sync with the broader market which fell sharply in early trade amid rising concerns about the escalation of geopolitical tensions in the Middle East.

Paring opening losses, TCS stock has risen as much as 1.5% to ₹4,063, while the market capitalisation climbed to ₹14.57 lakh crore. On the other hand, the BSE benchmark Sensex was down 776.5 points, or 1.05%, at 73,468, and the NSE Nifty dropped 191 points, or 0.85%, to 22,328 level.

At the current price, TCS shares trade 4.5% lower than its 52-week high of ₹4,254.45 touched on March 18, 2024, while it has rebounded 32% from its 52-week low of ₹3,070.30 hit on April 17, 2023. The country’s most valued IT stock has outperformed the BSE Sensex and BSE IT index in the last 12 months. The counter has given nearly 27% returns to its shareholders in the last one year, while the BSE Sensex and BSE IT index rose 22% and 26%, respectively. In the calendar year 2024, the Tata Group stock soared nearly 7% against a 2% rise in Sensex and 1% decline in the IT index during the same period. The counter has gained 14% in six months and 4% in three months despite a correction of nearly 4% in the past one month.

For Q4 FY24, TCS reported a consolidated net profit of ₹12,434 crore, up 9% from ₹11,392 crore a year ago. The revenue rose 3.5% year-on-year (YoY) to ₹61,327 crore, despite ongoing demand weakness. It also announced the final dividend per share at ₹28 for the financial year 2023-24. The company recorded full year net profit at ₹46,585 crore, up 10.5% YoY, while revenue was at ₹240,893 crore, up 6.8% from the last fiscal. The growth was driven by India business, which rose 11% QoQ and 37% YoY, aided by BSNL scale up; followed by the U.K. (up 3.6% QoQ). On the other hand, the performance of North America and Continental Europe businesses were weak.

Brokerages remain bullish on TCS after Q4 results

Post Q4 numbers, most brokerages remained bullish on the stock, projecting the target price of the company up to ₹4,700 per share, a potential upside of 15% from the current market price.

Foreign brokerage JPMorgan has upgraded TCS' stock to 'Overweight' and raised its price target to ₹4,500 from ₹4,000 earlier, while Goldman Sachs retained its 'Buy' rating with a price target of ₹4,350. UBS has also recommended a 'buy' rating on the stock with a target price of ₹4,700 per share.

Among domestic brokerages, Motilal Oswal reiterated its ‘BUY’ rating on the stock, with a target price of ₹4,600. “We have broadly maintained our FY25-FY26 EPS estimates. Over FY24-26E, we expect a dollar revenue CAGR of 10% and an INR EPS CAGR of 15%,” it says in a report.

The domestic brokerage in its report says that TCS is well positioned to withstand the weakening macro environment and ride on the anticipated industry growth, on the back of its size, order book and exposure to long-duration orders and portfolio. In terms of order book, the total commercial value (TCV) hit an all-time high at $42.7 billion in FY24, including Q4 TCV of $13.2 billion.

“We continue to expect TCS to benefit in FY25 from the large BSNL deal execution. But continued uncertainty on growth pickup in North America and Europe is likely to weigh on overall growth, which we estimate at 8.8% YoY.”

Axis Securities has maintained a ‘HOLD’ rating on the stock and upgraded the price target to ₹4,250 per share from ₹4,075 earlier. “With a strong deal pipeline and increasing demand for newer technologies, we believe TCS will demonstrate quicker recovery in H2FY25E. Hence, we maintain our HOLD rating on the stock,” the brokerage says in its report.

Choice Broking has also maintained “Buy” call on TCS and revised target price to ₹4,495, expecting strong deal momentum resulting in a comfortable deal mix of mega, large and small-mid sizes providing visibility for long-term growth. “There has been tremendous client interest in GenAI (pipeline doubled) and the company is leading the innovation and exploratory efforts for the same,” it says in a note.

Among global brokerages, JPMorgan has upgraded TCS' stock to 'Overweight' and raised its price target to ₹4,500 from ₹4,000 earlier, while Goldman Sachs retained its 'Buy' rating with a price target of ₹4,350. UBS has also recommended a 'buy' rating on the stock with a target price of ₹4,700 per share.

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