Tata Consultancy Services - Furloughs and Cross Currency Takes a Toll; Result Update Q3FY15 :: Edelweiss, report

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

Tata Consultancy Services’ (TCS) Q3FY15 revenue at USD3,931mn (up 0.1% QoQ and 2.5% in constant currency) was below Street’s 0.6% estimate. EBIDTA margin, at 28.8%, up 20bps QoQ was in line with Street’s estimates. Volume growth of 0.4% QoQ was impacted by weakness in energy and retail verticals. Commentary remained positive riding the deal pipeline, healthy order book and increasing traction in digital technologies. We have cut our FY15 USD revenue estimate to 16.2% (18% earlier) to factor in the cross currency impact. However, we maintain FY16 revenue growth estimate of 16.7% and forecast 14.0% growth for FY17.

Results lack positive surprise

TCS reported tepid revenue growth of 0.1% QoQ with volume growth of just 0.4% as seasonality and cross currency headwinds impacted the reported USD growth. The company reported revenue growth lower than Infosys for the first time in past two years. Revenue was driven by US and Europe, which grew 2.1% and 6.6% in constant currency terms, respectively. Barring energy and retail, all verticals grew on QoQ basis. TCS won seven large deals across five segments (eight in Q2FY15).

Reaffirms sanguine outlook

Even as revenue growth disappointed, the company reaffirmed its positive commentary on demand for FY16 riding strong demand pipeline, healthy order book and increased focus on digital technologies. From the vertical standpoint they expect BFSI, manufacturing and hi-tech and life science to do well in FY16, while energy is likely to be a laggard. Retail segment is expected to bounce back in FY16. On margin front, it maintained its stance of operating in EBIT margin range of 26-28% and the need to make investments particularly on building platforms and on digital side.

LINK

https://www.edelweiss.in/research/Tata-Consultancy-Services--Furloughs-and-Cross-Currency-Takes-a-Toll;-Result-Update-Q3FY15/28040.html