TCS Q2FY23 Results: Global brokerages give mixed view despite robust Q2 performance – here's what investors should know

TCS Q2FY23 Results: Despite robust performance between the July-September period of the financial year 2022-23 (Q2FY23), several global brokerages have given a mixed view on Tata Consultancy Services (TCS) a day after the country's largest software services exporter announced its quarterly earnings on Monday.

TCS reported an annualised 8.4 per cent growth in net income at Rs 10,431 crore for the September quarter, as per its exchange filings. The company said that its total revenue from services grew at a much faster pace of 18 per cent to touch Rs 54,309 crore in the period under review.

IT heavyweight had reported consolidated revenue of Rs 46,867 crore in the year-ago quarter from which it had earned Rs 9,624 crore net income.

Global brokerage firm Macquarie maintained an Outperform rating on TCS with a target price of Rs 4,150 apiece, expecting the company to widen the margin gap with Infosys given the headcount addition. It said, the company puts to bed concerns that margin issues could become structural.

While another global brokerage Jefferies believes TCS' Q2FY23 results were ahead of estimates with revenues, margins, and profits beating estimates. It maintained a Hold rating with a revised target price of Rs 3,180 apiece.

Deal wins at US$8.1bn were steady year-on-year but high subcontracting with lower net hiring reflects management's caution amidst an uncertain macro, Jefferies said. It raised FY23-25 estimates by 2-5 per cent to factor INR depreciation against USD.

On the contrary, Nomura reaffirmed a Reduce rating on TCS with a target price of Rs 2620 apiece, as it expects the company to continue to lag behind Infosys on revenue growth in FY23-24F. It said, “Order book flattening and longer cycle on decision-making from clients to weigh on growth.”

TCS share price surged a little above Monday’s price  in the early trade, to eventually decline around 2 per cent to Rs 3064 levels on the BSE and NSE intraday, respectively, on Tuesday. The stock in the last one year has slumped over 16 per cent and almost 20 per cent year-to-date on the bourses.