TCS disappoints; stock can fall 3-5% on Friday: ET

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TCS, India's top IT exporter, on Thursday reported a net profit of Rs 5,244 crore for the quarter ended September 30. This came slightly below ET Now estimates and may trigger some bit of profit-taking in trade on Friday.

According to analysts, TCS reported an ordinary set of numbers for the quarter ended September 30 which might not excite the Street that much. Hence, some bit of profit-booking cannot be ruled out considering the stock was already riding on high expectations.

"This is the first quarter since quite some time when we have seen the growth percentage marginally lower than what the Street expected," said Nipun Mehta, Founder & CEO, Blue Ocean Capital Advisors.

"Based on results, there could be some profit-booking and we may see a cut of anywhere from 3% to 5% which could be great opportunity to enter the stock again," he added.

The country's largest services exporter reported a net profit of Rs 5,244 crore, up 13.2 per cent YoY and down 5.8 per cent QoQ. An ET Now poll had estimated Q2 PAT at Rs 5,331 crore.

"TCS posted result in line with the estimates and we expect the stock to witness profit-taking in the coming session, that is Friday," said Ajit Mishra, AVP - Equity Retail Research, Religare Securities Ltd.

"The stock has an immediate support at Rs 2,630 spot level and if it slips below the same then it can retrace to Rs 2,500-2,540 zone in the near future. On the higher side, the stock may face resistance around Rs 2,750-2,800 levels," he added.

Currently, the stock is trading above its 50- and 200-DMA with the RSI of 54.52. Immediate support for the stock is at Rs 2,632; while the big support is at Rs 2,430.

The IT major, after announcing the results, said that sales for the second quarter of the current financial year stood at Rs 23,816 crore, up 7.7 per cent QoQ. An ET Now poll had predicted sales at Rs 24,005.5 crore. TCS will pay a dividend of Rs 5 per share.

"There is nothing great in the reported INR revenue and PAT reported by TCS. The Street was going with high expectations because the stock is trading almost around 21.5 times FY16 earnings. So, for this result, I do not think the stock can go up," said Madhu Babu, IT Analyst, HDFC Securities.

Street will be disappointed by the dollar revenue growth by TCS which came in 6.4 per cent lower at $3,929 million compared to $3,694 million a on sequential basis, driven by strong volume growth.

However, analysts expected the company to post around 7-8 per cent growth quarter over quarter (QoQ) in dollar terms.

"We were expecting around 7 per cent growth in dollar terms. But the market was already building higher growth rate into the price - so, at 21.5 times FY16 and almost 18.5-19 times FY17 earnings there is not much of a positive surprise on the revenue and PAT front. This can be taken as negatively by the market," he added.

TCS has been maintaining the uptrend since 2009 and has generated exceptional returns for the investors. The stock has rallied nearly 400 per cent in the last five years.

However, despite the weak numbers, analysts are of the view that its long-term uptrend would continue; and advise investors to maintain accumulate-on-dips approach.

"As per the projection technique, 3,000 is the next mid-term target which could further extend to 3,500 in the next one year," said Mishra of Religare Securities.