Q4 Preview: TCS to lead IT pack; may see upper single digit rise in profit

Large-cap IT major TCS is expected to register a single-digit growth in revenue and profit for the January-March quarter (Q4FY24) as compared to the same quarter in the year ago period due to large deal ramp ups and operational efficiencies, said analysts. 

Reversal of furloughs and incremental contribution from the BSNL deal and other deals will fuel the revenues, analysts said. The company is expected to report the strongest quarterly performance among its peers. TCS is scheduled to release Q4 results on Friday, April 12, 2024. 

According to brokerage estimates, TCS is likely to report a net profit in the range of Rs 12,283 crore to Rs 11,452 crore for the fourth quarter, up 7-8 per cent year on year (YoY) against Q4FY23 where it reported Rs 11,058 crore. Sequentially, this could be 3-7 per cent higher. 

Revenue is expected to increase 3-4 per cent YoY between Rs 61,662 crore and Rs 61,077 crore, according to brokerage estimates. 

Key monitorables: Street will look out for the performance of BFSI vertical, medium-term industry demand trends and impact of macro headwinds on demand. While also keeping a tap on deal wins and deal pipeline, revenue growth and margin outlook for FY25, hiring plans and investments in GenAI partnerships. 

Nomura: In large caps, Nomura estimates TCS to report the strongest revenue growth of over 1.5 per cent in Q4 quarter on quarter (QoQ) in cc terms partly aided by the BSNL deal.

It expects over 0.4 per cent revenue contribution in Q4 from BSNL project (one month) and reversal of negative impact from furloughs. 

Further, adjusted EBIT margins to expand 30 basis points QoQ against the third quarter adjusted EBIT margin of 25 per cent.

With key things to watch being commentary on cost takeout projects, banking vertical and outlook on client CY24 discretionary spend.

HSBC: It expects that TCS will continue to cut costs and should see benefits in Q4 as well. The brokerage further expects TCS to report 1.3 per cent cc QoQ growth and slight improvement in margins. 

The investment bank expects cross-currency tailwind for the company of 70 basis points (bps) with average USD-INR rate assumed to be at Rs 83.03. 

Axis Securities: It expect 2.3 per cent growth due to reversal of furlows and ramp up of the deals with moderation of costs likely to expand margins by 72 bps. 

The brokerage further estimates deal wins to be in the range of $7- $9 billion in the quarter

The management commentary on new deal ramp-up, visibility going ahead, and vertical outlook on BFSI, Hi-tech, and manufacturing are key things to watch out for, its analysts wrote in a note. 

BNP Paribas: It expects USD revenue growth of over 1.3 per cent QoQ (1.1 per cent QoQ in CC) on reversal of furloughs and incremental contribution from the BSNL and other deals. 

It models a 24 bp QoQ increase in EBIT margin on account of operating efficiencies.

Sharekhan: The brokerage expects TCS to lead the revenue growth among Tier 1 companies with 1.6 per cent QoQ CC revenue growth due to large deal ramp ups. 

EBIT margins are likely to improve by 25 bps QoQ, aided by operating efficiencies.