 "What to expect from TCS’ Q2FY16 results today")
Here’s a quick compilation of what the leading research houses and brokerages expect:
Nomura
TCS for the past four quarters has come in below consensus revenue growth expectations, driven by segment-specific weakness in Energy / Telecom / Insurance or geographical weakness in Japan / LATAM /India, and this has led to the stock underperforming the NIFTY by 2% in the last twelve months. We believe an in-line or better result is crucial in Q2 for stock performance, even though we consider TCS to be fundamentally stronger than Infosys / Wipro. Expect constant currency growth of 4% q-o-q.
Motilal Oswal Research
We expect ~70bp negative impact on revenue growth on account of depreciation in AUD and currencies in Latin America, where TCS has a decent exposure. USD revenue growth is expected to be 3.3%. We expect EBITDA margin to expand by 65bp QoQ to 28.7% on the back of rupee depreciation. Key issues to watch for include growth in troubled segments – Energy, Telecom, Insurance; outlook on revenue from TCS Japan; any change in pricing commentary; and traction in new Digital initiatives (automation / solutions).
Prabhudas Lilladher
We expect TCS to report 3.7% q-o-q growth in USD terms and 4.5% q-o-q in constant currency terms, implying 80bps cross?currency headwind. EBITDA margins are expected to expand by 84bps, mainly due to operational efficiencies and benefit from currency depreciation. Profit after tax (PAT) for Q2FY16 is expected to be higher by 5.6% q-o-q.
Antique
We expect the top five Indian IT companies - Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies (HCLT) and Tech Mahindra (TECHM) - to post constant currency (CC) growth in the 1.7% - 4.2% range and a cross-currency impact of 60-90bps for the quarter.
Kotak Institutional Equities
We forecast 70 bps increase in EBIT margin led by benefits of rupee depreciation and normalisation of wage hike. The focus will be on TCS commentary on demand, growth outlook and TCS’ positioning in digital, especially in view of recent strong performances of Accenture. We have an ADD rating on the stock with a target price of Rs 2,800.
Nirmal Bang
The weak exit rate for FY15 as well as weaker-than-expected revenue growth in 1QFY16 has rendered the company’s ‘aspiration’ to grow above Nasscom’s guidance of 12%-14% for FY16 a big challenge. Growth in 2QFY16 is a key figure which will help in forming a more educated view regarding FY16 growth as the company has maintained that 2HFY16 will be weaker than 1HFY16.
