TCS Q4FY22 Results Preview: IT major likley to report moderate earnings; revenue to grow 3-3.5%, margins nearly flat QoQ

Information and technology major Tata Consultancy Services (TCS) is expected to report moderate earnings during the fourth quarter of the financial year 2021-22 (Q4FY22), several brokerages said.  

Zee Business research report TCS Q4 results preview was also in line with brokerages. 

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TCS is likely to register around 3-3.5 sequential growth in revenue to Rs 50580 crore in rupee terms and US $672 crore in dollar terms during Q4FY22, Zee Business senior research analyst Kushal Gupta said, adding further that the margins to grow marginally to 25.1 from 25 per cent sequentially in Q4. 

Similarly, the company may report Rs 10,100 crore profit during the quarter, which translates into around 3.5 per cent growth as compared to Rs 9769 crore in a year-ago quarter, the analyst said. 

Q4 में कैसे रहेंगे TCS के नतीजे?
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कैसे रह सकते हैं नतीजे, जानिए कुशल से...@KushalGupta44 #TCS #ResultsOnZee pic.twitter.com/cyfANXc961

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According to ICICI Direct, the growth of Indian IT companies is expected to be moderate in Q4FY22 as witnessed in the Q4 quarters historically. The margins are expected to take a hit due to continued higher employee expenses, while the demand environment continues to see strong momentum, it said.  

In line with the Zee Business report, the brokerage said, TCS may report Rs 50,418 crore revenue in rupee terms, with growth expectations of 3.2 per cent and profit may see a surge of over 2 per cent to Rs 9,989 crore during the March-end quarter of the financial year 2021-22.  

“TCS is expected to register 3 per cent QoQ (quarter-on-quarter) growth in constant currency led by continued improvement in demand from BFSI, healthcare, and retail, acceleration in digital technologies, and ramp-up of deals. Further, a cross-currency headwind would lead to revenue growth of 2.7 per cent QoQ in dollar terms,” ICICI Direct said in its Q4 preview report. 

It expects EBIT margins to decline 20 basis points QoQ to 24.8 per cent due to a continued increase in employee costs amid high attrition. Corporate restructuring planned for FY23 and demand outlook/attrition/opening of travel will be key monitorable in Q4, according to brokerage. 

Similarly, JM Financial is also expecting 3.5 per cent QoQ growth in constant currency terms with around 60 bps cross-currency headwinds. It expects EBIT margins to improve slightly by 20 bps QoQ to 25.2 per cent aided by growth leverage and slight rupee depreciation.  

Key things to watch out for are: CY22/FY23 client spending outlook, margin performance and outlook, especially given the likely resumption in travel and supply-side pressures and outlook on pricing, the brokerage said in its Q4 earnings preview.