TCS share trades flat ahead of Q1 result; here’s what to expect

The share of IT services major Tata Consultancy Services (TCS), which is scheduled to release its June quarter earnings on Friday, was seen trading in a narrow range with a positive bias. At 10:20 AM; TCS shares were trading 0.2% higher at ₹3,293.35 against the previous closing price of ₹3,286.95 on the BSE. In the first hour of trade so far, the IT heavyweight hit a low of ₹3,273 and a high of ₹3,300. In comparision, the BSE benchmark Sensex was trading 268 points higher at 54,446 levels, with 22 of 30 scrips flashing in green, led by L&T, Axis Bank, NTPC, M&M, and ICICI Bank.

The share price of the country’s largest software exporter has been gaining for the last 3 days and has risen 2.37% during the period. The stock has given flat returns in the last one year, while it has climbed nearly 12% since the beginning of the calendar year 2022. In the last one month, TCS share price has fallen 3% and 0.6% in the past one week.

Technically, TCS shares move in a ‘bearish’ range, trading higher than 5-day and 20-day moving averages, but lower than 50-day, 100-day, and 200-day averages. The IT stock hit a 52-week high of ₹4,045.50 on January 18, 2022, while it touched a 52-week low of ₹3,023.35 on May 17, 2022.

Here’s what to expect from TCS Q1 results:

IT major TCS is expected to report single-digit growth on a sequential basis in constant currency for the first quarter ended June 30, 2022 (Q1FY23), while margins are expected to take a hit on account of the annual wage hike cycle and visa-related costs as well as an uptick in travel-related expenses as the economy opens up. In the current quarter, key things to watch will be a commentary on the demand outlook in key verticals of Banking, Financial Services and Insurance (BFSI), Retail Consumer packaged goods (CPG), and margin forecast for FY23. Also, investors will also keep a close eye on comments on hiring and attrition trends.

Analysts at ICICI Direct expect TCS to register 3% quarter-on-quarter (QoQ) growth in constant currency in Q1FY23, led by continued improvement in demand from BFSI, healthcare and retail, acceleration in digital technologies, ramp up of deals. The profit after tax (PAT) is expected to decline 0.8% QoQ, while revenue is likely to increase by 3.8% quarterly aided by rupee depreciation.

As per the report, the cross-currency headwinds of 140 bps would lead to revenue growth of 1.6% QoQ in dollar terms. On the operating front, Earnings Before Interest and Taxes (EBIT) margins are expected to decline by 110 bps QoQ to 23.9% due to wage revision in both onsite & offshore, increase in retention costs, and a rise in travel costs.

TCS closed the full financial year 2022 with a net profit of ₹38,327 crore, up 14.8% on a year-on-year (Y-o-Y) basis. The revenue jumped 16.8% Y-o-Y to ₹191,754 crore. For the January-March quarter of FY22, the IT behemoth reported a consolidated net profit of ₹9,926 crore as compared to ₹9,246 crore a year ago, registering a growth of 7%. Revenue from operations jumped 16% Y-o-Y to ₹50,591 crore for the quarter ending March 2022. The Tata group company's total employee count stood at 592,195 at the end of the fiscal. However, the company’s IT services attrition (LTM) continued to remain high at 17.4% for FY22, up from 15.3% in the December 2021 quarter.