TCS Ltd (Q1 FY14)

India Infoline News Service | Mumbai |

TCS registered a stellar volume growth of 6.1% qoq in Q1 FY14 - materially above our estimates of 4% qoq growth.

CMP Rs1,658, Target Rs1,760, Upside 6.2%
 
  • Comprehensive beat on volume expectation; Realization corrects marginally 
  • Sustained broad based growth across segments; Discretionary services continue to grow well
  • OPM expands 30bps against expectation of contraction; Net  employee additions were weak 
  • All round growth and positive commentary continue to impress; Increase estimates but retain MP
Result table
(Rs mn)
Q1 FY14
Q4 FY13
% qoq
Q1 FY13
% yoy
Net sales
179,871
164,301
9.5
148,687
21.0
Operating profit
51,532
46,599
10.6
43,328
18.9
OPM (%)
28.6
28.4
29 bps
29.1
(49) bps
Depreciation
2,905
3,015
(3.6)
2,431
19.5
Other Income
2,517
4,184
(39.8)
1,754
43.5
PBT
51,144
47,768
7.1
42,651
19.9
Tax
12,312
11,420
7.8
9,457
30.2
Effective tax rate (%)
24.1
23.9
-
22.2
-
Other prov./minority
870
380
128.9
388
124.2
Adjusted PAT
37,962
35,968
5.5
32,806
15.7
Adj. PAT margin (%)
21.1
21.9
(79) bps
22.1
(96) bps
Reported PAT
37,962
35,968
5.5
32,806
15.7
EPS (Rs)
19.4
18.4
5.5
16.8
15.7
Source: Company, India Infoline Research

Comprehensive beat on volume expectation; Realization corrects marginally 

TCS registered a stellar volume growth of 6.1% qoq in Q1 FY14 - materially above our estimates of 4% qoq growth. With a realisation decline of 1.6% qoq as well as cross currency impact of 60bps, the reported dollar revenues grew 4.1% qoq to US$3.165bn. Growth was largely driven by the international business which witnessed 5.8% qoq growth in constant currency. Due to the material rupee depreciation, the reported rupee revenues were up 9.5% qoq to Rs180bn. Management commentary on demand environment continued to be robust especially on discretionary spends, deal closures and executable order book. Company announced ten large deals (eleven deals signed last quarter) across verticals and geographies.  


Sustained broad based growth across segments; Discretionary services continue to grow well

The hallmark of TCS performance over past many quarters is the broad based nature of its growth across all business segments – verticals, geographies and services. This quarter too was no different. Amongst verticals, growth was driven by BFSI (+3% qoq), Retail (+8.8% qoq) and Telecom (+7.5% qoq). Amongst services, ADM (+3.9% qoq) and consulting (discretionary service) were the key growth drivers. We note that the discretionary services (ERP, Consulting) have continued to grow well despite the general weakness in the environment as evidenced in results/commentary of companies like SAP, Oracle or Infosys. Amongst the geographies, developed market (North America +5.9% qoq growth, UK +5.4% qoq growth and Continental Europe +9.6% qoq growth) were the key revenue drivers. India business on the other hand was weak with revenues de-growing ~10% qoq in dollar terms.


OPM expands 30bps against expectation of contraction; Net employee additions were weak 

On the back of the stronger than expected revenue performance, the Q1FY14 OPM too came in better than our estimates. Against our expectation of ~40bps correction, the OPM expanded 30bps supported by rupee depreciation and SG&A leverage. More specifically, the headwinds of salary hike (172 bps impact), realization correction (35bps impact) and visa costs were more than offset by positive impact from rupee depreciation (161bps) and SG&A leverage (96bps). Resultantly, despite lower than expected other income, the PAT grew 5.5% qoq versus our expectation of ~2% qoq growth. On the employee front, management maintained its full year hiring guidance of 45000 gross additions. Net employee additions, though, was weak during the quarter with only 1390 employee additions (0.5% of Q4 FY13 base).


All round growth and positive commentary continue to impress; Increase estimates but retain MP

TCS Q1 FY14 result was a positive surpri

BSE 2,617.70 16.70 (0.64%)
NSE 2,620.05 18.55 (0.71%)

***Note: This is a NSE Chart

 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.