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TCS share price declines on Q1 numbers; CLSA raises target –

The share price of the IT service major Tata Consultancy Services (TCS) declined in the early traded on July 10, a day after the company reported its June quarter numbers.

The company reported 12.9 percent QoQ declined in the June quarter profit at Rs 7,008 crore, dented by lockdown-led supply and demand challenges.

The year-on-year fall in profit stood at 13.8 percent, which partially impacted by a 67.8 percent YoY (down 19 percent QoQ) decline in other income to Rs 456 crore.

Consolidated revenue declined 4.1 percent sequentially to Rs 38,322 crore in the quarter ended June, impacted by all segments, barring banking, financial services and insurance (BFSI). However, revenue increased 0.4 percent YoY.

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CLSA | Rating: Outperform | Target: Raised to Rs 2,260 from Rs 2,240 per share

The Q1 margin was a miss but cashflow is stable and the outlook is optimistic. The company has exuded confidence of a recovery in the H2.

The BFSI demand showed that there is a better resilience with the healthy deal pipeline. It has changed FY21/FY22 EPS estimates by -3 percent/0 percent, CNBC-TV18 reported.

Macquarie | Rating: Downgrade to neutral from outperform | Target: Rs 1,900 per share

The growth recovery will be gradual given the uncertainties, while margin drag will remain till the growth recovers. The EBIT margin may decline 80 bps in FY21 & improve 160 bps in FY22, reported CNBC-TV18.

Kotak Institutional Equities| Rating: Reduce

The key highlight in Q1 was a strong 21 percent YoY growth in the new deals. It has cut FY21-23 EPS estimates by 2-4 percent, reported CNBC-TV18.

Motilal Oswal | Rating: Neutral | Target: Rs 2,300

While the peak of COVID-19-led uncertainty may be behind, near-term negative surprises related to demand, pricing, and collections cannot be ruled out.

Nevertheless, TCS should be able to better navigate through these challenges (v/s the rest of the industry). Over the medium term, we expect TCS to be a key beneficiary of the COVID-19-driven increase in technology intensity across verticals.

Dolat Capital | Rating: Reduce | Target: Rs 2,070

Given higher-than-expected slide and softer-than-expected tone on recovery broking house have curtailed its growth estimates by 1 percent and 2 percent, respectively for FY21 and 22E. Also given the deeper than expected OPM cut in Q1, it has moderated the OPM estimates by 60bps/40bps respectively for FY21/22E.

It expects growth of 3 percent CC QoQ in USD revenues led by about 130bps tailwinds from supply-side normalisation and recovery of demand following the gradual opening of business across the globe.

Prabhudas Lilladher | Rating: Hold | Target: Rs 2,116

While TCS will see declining FY21 earnings growth due to COVID-19 led business disruption, broking house expects it to bounce back to sustained double-digit growth from FY22 as it resumes market share gains.

It has increased EPS estimates (2.6 percent avg) of FY22/23E led by revenue upgrade of 2.5 percent led by pent-up demand and now value TCS on 21X (earlier 20X, due to market share gains) Sep-22 EPS of Rs 100 and arrive at a changed target price of Rs 2116 (earlier Rs 1982).

At 0918 hours, Tata Consultancy Services was quoting at Rs 2,183.20, down Rs 21.15, or 0.96 percent on the BSE.