TCS shares to fall on Thursday post Q1 results?

The quarterly results of Tata Consultancy Services (TCS) for Q1 were largely in line with Street estimates, failing to bring any surprises. Historical data compiled by SAMCO Securities suggests that TCS shares have fallen in nine out of twelve instances following the quarterly results in the next trading session. Additionally, the stock returns remained negative in seven out of twelve instances over the next week.

In the previous quarter, TCS shares fell 1.6 percent in the session following the results and were down 4.2 percent for the week. TCS shares have consistently fallen in the next session after results for the past five quarters. After Q4FY23 results, the shares were down 4.2 percent in the week, down 0.2 percent after Q2FY23 results, and down 8.3 percent after Q1FY23 results.

Today, the IT firm reported a 16.83 percent year-on-year rise in net profit at Rs 11,074 crore for the June quarter, compared to Rs 9,478 crore in the same quarter last year. This profit growth figure aligns with analyst estimates of 15-20 percent.

The revenue for the quarter stood at Rs 59,381 crore, reflecting a 12.55 percent YoY increase from Rs 52,758 crore in the same quarter last year. TCS stated that revenue growth in constant currency terms was 7 percent YoY.

TCS reported an EBIT margin of 23.1 percent for the quarter, up 10 basis points YoY. However, the margin contracted 130 basis points sequentially due to salary hikes during the quarter. Deal wins for the quarter amounted to $10.20 billion, aligning with analysts\’ forecasts of $10-11 billion.

Given the muted expectations in the IT sector, TCS\’ quarterly numbers met Street estimates. Analysts noted that despite the overall sluggish environment and reduced discretionary spending in the US and the UK, TCS achieved a 12.6 percent YoY growth in revenue in rupee terms and a 7 percent growth in constant currency terms. The company experienced robust growth in its Life Sciences & Healthcare and Manufacturing verticals, with respective growth rates of 10.1 percent and 9.4 percent. Analysts expressed positive surprise regarding the profitability and lack of significant deterioration in verticals, considering the global events unfolding. Looking ahead, they anticipate TCS management to focus on operational efficiencies and view these mixed numbers with a positive bias for the IT industry.

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