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Earnings preview: Top things Dalal Street will look for in TCS Q3 results

As it is seasonally a weak quarter for IT companies due to implications of US tax reform and potential changes to visa rules in US

Pranati Deva  |  New Delhi 

Earnings Preview: Top things Dalal Street will watch out for in TCS Q3

IT major Tata Consultancy Services (TCS) will be the first IT company to announce its third-quarter on Thursday. The stock was trading flat in intra-day deals today after rallying nearly 4% on Wednesday ahead of numbers. As it is seasonally a weak quarter for IT companies due to implications of US tax reform and potential changes to visa rules in US, analysts expect growth to be muted. reported a 2.1% decline in its second-quarter profit to Rs 64.46 billion from Rs 65.86 billion in the same period last year due to higher costs and sluggishness in the and retail businesses. rose 4.3% to Rs 305.41 billion from Rs 292.84 billion last year. Revenue is expected to be at Rs 312.9 billion, up 2.4% (QoQ) and 2% (YoY), according to Reliance Securities, while Motilal Oswal Securities suggests sales to be up 4.4% (YoY) at Rs 310.28 billion Net Profit According to Motilal Oswal Securities, for the IT major will remain muted, estimated to be at Rs 63.93 billion, down 5.7% (YoY) and 0.8 (QoQ) respectively led by lower other income and marginally higher tax outgo. Growth growth for has been dragged lower by the softness seen in BFS and Retail. Although it has been seeing a pick-up in Insurance and emerging verticals, pressure points have been restricting growth.

MOSL expects continuation of these factors and seasonal weakness leading to 1.1% QoQ dollar growth. Kotak Securities, on the other hand, expects constant currency (c/c) growth of 1.4% and negligible cross currency impact. Dollar Revenue Dollar is expected to grow by 2% QoQ, largely in-line with CC growth, according to the brokerage Reliance Securities. They also added that operational efficiency will aid the margin expansion. EBIT Margin Reliance Securities estimates EBIT Margin to be at 25.4% in the third quarter as compared to 25.1% in the previous quarter. As for Motilal Oswal, their EBIT margin estimate stands at 24.9% (-20bp QoQ), coming in below the lower end of the guided range of 26-28% for the fourth straight quarter. Key issues to watch out for Investors will look out for outlook on BFS and retail, traction in new Digital initiatives (automation/solutions), margin expectations given the lower organic growth and impact of US tax reform.

First Published: Thu, January 11 2018. 10:08 IST
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