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TCS' Q2 revenue miss disappoints brokerages, but strong deal wins may provide comfort
As revenue was a miss despite the robust order book, most brokerages expect to see a ramp-up of deal wins to usher growth for TCS from FY25. Information technology major Tata Consultancy Services' lower-than-expected revenue for the July-September quarter turned out to be a sour pill for brokerages, more so because deal wins still remained strong. Most brokerage firms now await to see the strong deal wins translate into revenue growth, however a few expect it to be pushed on to FY25, dragged by the weak macro environment. "The second half of FY24 is unlikely to see a V-shaped recovery for TCS as bulk of the benefit of ramp-up of large deals will only be visible in FY25," brokerage firm HSBC stated in its report. Bernstein also agrees as it feels the strong deal wins for TCS set the platform for growth in FY25. Nomura also shares similar views and believes that the near-term visibility for TCS remains low despite its orderbook holding up. Adding to the list, Motilal Oswal Financial Services also pegged its growth expectations from TCS from FY25. "We continue to expect TCS to deliver superior growth in FY25 driven by its leadership in cost efficiency, which has led to strong deal inflows in recent quarters," the firm stated. Regardless, TCS' sequential rise in margins came as a positive surprise for most brokerages. MOFSL feels TCS should benefit from its scale and ability to optimise talent to control costs in the near-to-medium term, with a sharp recovery in its EBIT margin performance. On the other hand, Morgan Stanley forecasted limited EPS cuts for TCS, thanks to its margin beat in Q2. Source - Money Control
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