Views mixed on TCS on weak Q3 margins

Mumbai: Brokerages have mixed views on Tata Consultancy Services after the IT major’s better than expected December quarter revenues but missed margin estimates.

While Credit Suisse, Jefferies, Bernstein, Nomura, and BNP Paribas increased their target price for

, Goldman Sachs reduced it. JP Morgan and Morgan Stanley maintained their target prices.

While maintaining a ‘hold’ rating with a target price of ₹4,180, Jefferies said TCS’s rich multiples offer limited scope for rerating relative to its growth. “The company recorded a healthy growth; however, weak margins disappointed,” the firm said.

Morgan Stanley said better growth more than offsets the margin miss. Revenue growth surprised after a gap of two quarters, which should drive some optimism towards the stock, it said. Morgan Stanley sees room for valuations to move up and has a target of ₹4,400 on the stock.

Views Mixed on TCS on Weak Q3 Margins

According to Edelweiss, TCS delivered strong growth numbers, and the overall pipeline remains robust. “We believe demand for core transformation remains strong, and this coupled with exemplary execution is likely to drive strong earnings,” Edelweiss said in a note.

Motilal Oswal has maintained its positive stance on TCS, given its strong growth outlook. “We are encouraged by the robust topline growth in a seasonally weaker quarter. We expect this performance to alleviate the concerns on its growth potential and the likely drag from growing share of smaller deals in the market,” the brokerage said, while lowering its FY22 EPS by 2%.

Shares of TCS gained 1.05% to ₹3,897.65 on Thursday.


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