TCS Share Price: Details of the Q3 results Decoded by ICICI Securities

Tata Consultancy Services (TCS) reported a healthy set of Q3 FY21 results and were above estimates on all fronts. The growth was across geographies and verticals. The QoQ growth in revenues was led by healthy demand in core transformation services and conversion from earlier deals. In terms of geographies (in CC terms), North America grew 3.3% QoQ, UK & Continental revenues increased 4.5% QoQ & 2.5% QoQ. In terms of verticals, revenue growth was led by Manufacturing (up 7.1% QoQ), BFSI (up 2% QoQ), Life Sciences and healthcare (up 5.2% QQ), Communication & Media (up 5.5% QoQ), Regional Markets & Others (up 7.3% QoQ) and Retail & CPG (up 3.1% QoQ). The attrition stood at 7.6% and the company added 15,721 associates taking the total to 469,261. The company deal pipeline continues to be healthy.

Q3 FY21 Earnings Summary:
 
Constant currency revenues grew 4.1% QoQ, above ICICI Securities estimate of 3%. US$ revenues grew 5.1% QoQ to $ 5702 mn, above estimates of 3.6% QoQ growth and $ 5619 mn estimate.
 

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Rupee revenues grew 4.7% QoQ to Rs 42015 cr (above estimate of Rs 41470 cr). EBIT margins expanded 42 bps QoQ to 26.6%, above estimates of 25.1%. This was mainly on account of better effort mix, improvement in utilisation, productivity, revenue growth partially offset by wage hikes. PAT of Rs 8701 cr was above estimate of Rs 8578 cr, on the back of better operating performance. TCS has declared an interim dividend of Rs 6 per share.
 
The company aspires to register double-digit revenue growth in FY22E. This coupled with a healthy deal pipeline, increase in deals like captive carve outs and robust margins keep us positive on the stock from a longer term perspective. We would be revisiting our estimates and target price shortly.