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Tata Consultancy Services (TCS) shares failed to stay in the green on Tuesday, a day after the IT major kicked off the corporate earnings season. The TCS stock finished the day down by Rs 5 or 0.1 percent at Rs 3,691.5 apiece on BSE, after struggling within a Rs 88.6 range around the flatline.

After the market hours on Monday, TCS reported a net profit of Rs 9,926 crore for the January-March period, up 1.6 percent on a quarter-on-quarter basis. Its revenue increased 3.5 percent sequentially to Rs 50,591 crore, according to a regulatory filing.

Analysts in a CNBC-TV18 poll had estimated the IT major's quarterly net profit at Rs 10,050 crore and revenue at Rs 50,390 crore.

The company's revenue in constant currency terms increased 3.2 percent as against analysts' expectation of three percent.

TCS posted an EBIT margin of 24.96 percent for Q4 as against 25.03 percent for the previous three months. Analysts had estimated the EBIT margin at 25.1 percent.

The company's IT services attrition rate came in at 17.4 percent for the January-March period, as against 15.3 percent for the previous quarter.

Should you buy, hold or sell TCS shares after the release of the IT major's Q4 results? Here's what brokerages suggest:

CLSA

The brokerage maintained its 'outperform' rating on TCS and raised its target price to Rs 4,000 from Rs 3,850.

The IT company's hiring and order book look strong but volatility in its margin is an overhang, according to CLSA. Tata Consultancy Services' order book is 40 percent above its run rate in the past four quarters, it added.

The brokerage trimmed its FY23 and FY24 earnings per share (EPS) forecasts by 1.6 percent and 0.4 percent respectively.

JPMorgan

The brokerage continued with its 'neutral' rating on TCS with a target price of Rs 3,900.

The TCS stock trades at 31 times its one-year forward price-to-earnings, a premium of 11 to Infosys and eight percent to Accenture, according to JPMorgan.

TCS shares have outperformed the Nifty IT by nine percent on a year-to-date base partly led by support from its buyback, said the brokerage, which doesn't see further upside triggers for the stock.

Morgan Stanley

The brokerage has an 'equal-weight' rating on the stock with a target price of Rs 3,900.

According to Morgan Stanley, the macroeconomic climate is volatile and conditions trickier than last year, but demand is resilient for TCS, but revenue upgrades are unlikely for the company despite a good order intake in Q4.

Street assumptions on the FY23 margin appear elevated, the brokerage added.

Jefferies

The brokerage retained its 'hold' rating on the TCS stock with a target price of Rs 3,925.

TCS shares are at a 10 percent premium to Infosys despite having three percent lower earnings growth, according to Jefferies.

The brokerage said TCS earnings were ahead of estimates with a recovery in stressed verticals driving growth for the company.

It raised its FY23-24 estimates for TCS by 1-2 percent, and expects the company's margin to be around 25 percent over FY23-24.

Nomura

The brokerage continued with a 'neutral' call on TCS but raised its target price to Rs 3,930 from Rs 3,890.

Nomura expects the company's EBIT margin to drop by 40 basis points to 24.9 percent in FY23.

The company's Q4 earnings modestly beat consensus estimates on the revenue front, according to the brokerage.

Antique

The brokerage retained its 'buy' rating on the stock, which it values at 33 times forward price-to-earnings for FY24.

Antique believes the company's Q4 performance was in line with estimates with growth drives being largely intact.

The brokerage remains constructive on TCS with the company's ability to engage with large clients for large transformation programs. It expects TCS revenues to grow 12 percent and 11 percent in organic constant currency terms in FY23 and FY24, 50 basis points higher than the top four average.

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(Edited by : Sandeep Singh)

First Published:Apr 12, 2022 9:49 AM IST