Tata Stock To HOLD: TCS Share Price Crosses Rs 4,000 Mark Ahead Of Q4 Results, To Declare Dividends

Tata Consultancy Services (TCS) is the biggest IT stock in India in terms of market cap, and it crossed the Rs 4,000 mark on Friday as investors await Q4 results announcement later in the day. TCS will also reward investors with a final dividend payout for FY24. TCS is among the top picks in the IT sector for Q4FY24 earnings amidst a challenging environment.

At the time of writing, TCS's share price traded at Rs 4001.20 apiece, up by 0.5% on BSE with a market cap of Rs 14,47,669.18 crore. The share price gained as much as Rs 4013.25 apiece as an intraday high.

TCS will announce its fourth quarterly and full-year financial results for FY24. The company's board of directors will also recommend the final dividend for the same fiscal.

For Q4FY24, Axis Securities said, "We expect TCS to report revenue growth of 2.3% QoQ. Its moderation of
sub-con cost is likely to result in margin expansions to the tune of 72bps."

Axis Securities also expects deal wins in the range of $7- $9 Bn in the quarter. Further, it expects the management commentary on new deal ramp-up, visibility going ahead, and vertical outlook on BFSI, Hi-tech, and Manufacturing which are key things to watch out for.

Further, JM Financial expects TCS to report constant currency revenue growth of 1% with 30bps cross-currency tailwinds translating into 1.3% QoQ USD revenue growth. It further expects a 20bps expansion in EBIT margin to 25.2% led to better utilisation and lower sub-con expenses, offsetting lower margins from the BSNL deal. Also, JM has built a USD 100mn+ contribution from BSNL.

JM Financial recommends HOLD on TCS for a target price of Rs 4,040. Similarly, BOB Caps has recommended HOLD for a target price of Rs 4,050.

Furthermore, Nirmal Bang in its report said, "We are valuing TCS at target 12-month forward PE of 23.7x, which represents 1SD below the 5-year historical mean. This has been raised from the 20x that we had assigned earlier (10-year mean less 0.5SD). Target multiples for others are at a premium/discount to TCS."

Coming to dividends, TCS has a strong track record of paying hefty dividends. Earlier, for FY24, TCS paid the first and second interim dividends of Rs 9 per share each for which it turned ex-dividend in June and September 2023. Further, it paid a third interim of Rs 9 per share along with a special dividend of Rs 18 per share for which it turned ex-dividend in January 2024.

In FY23, TCS paid dividends of a whopping 11,500% aggregating Rs 115 per share.

Currently, it has a dividend yield of 2.89%.

In the third quarter of FY24, TCS posted a consolidated net profit of Rs 11,058 crore in, registering a growth of 1.95% year-on-year but a decline of 2.5% quarter-on-quarter. Consolidated revenue was at Rs 60,583 crore, which rose by 4.04% YoY and 1.49% QoQ. In constant currency, TCS revenue growth was at 4% YoY. While EBIT margin expanded by 50 bps to 25% in the quarter.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.