TCS Soars High On A Good Set Of Numbers

TCS announced its results post market hours on Friday, October 19, 2012. The company posted strong growth in terms of volumes and revenues. Growth for TCS in Q2FY13 has been uniform and has been coming in from all fronts in terms of geographies, verticals and service offerings. Moreover, the management has a favourable outlook on its strategy amidst an evolving environment and would continue to concentrate on achieving growth by maintaining profitability. The stock price of TCS saw an intraday high of Rs.1332 a piece translating into an upswing of 3.23 per cent.

TCS announced a rise in revenue from USD 2.728 billion in Q1FY13 to USD 2.853 billion in Q2FY13, a growth of 4.58 per cent. In terms of operating profit, TCS’s figures were higher than those of Infosys for this quarter. While Infosys’ Operating Profit Margin for Q2FY13 stood at 26.27 per cent, TCS’s stood at 26.74 per cent. The net profit margin of TCS saw an improvement of 40 basis points sequentially, increasing from USD 604 million in Q1FY13 to USD 643 million in Q2FY13.

Sequential growth was 5.1 per cent in rupee terms for TCS this quarter and this was spread over across all fronts. Geographically, UK turned out to be the growth driver in emerged economies, growing by 5.7 per cent QoQ. In emerging economies, Latin America and India contributed to growth with a healthy rate of 8.3 per cent and 11.7 per cent respectively.

In terms of verticals as well, there was growth seen coming from all industries among which manufacturing and telecom outperformed, growing sequentially by 9.5 per cent and 5.2 per cent respectively. BFSI, which contributes to 42.8 per cent of revenues for TCS, grew at a healthy 4.7 per cent.

Service offerings too had growth from each offering other than Asset Leverage Solutions which de-grew by 1.5 per cent. Global consulting, infrastructure services and assurance services contributed majorly to growth, having increased by 13 per cent, 12.6 per cent and 7.1 per cent respectively.

TCS added 41 new clients in Q2FY13 as compared to the 29 added in the previous quarter. Of these 41, 11 were large deals. This has been indicative of a healthy deal flow and good traction on the orders front. To aid to this, TCS added 10531 employees in Q2FY13 as compared to 4962 in the previous quarter and had an utilisation rate of 81.60 per cent, which marks higher operationalisation.

TCS has shown good volume growth, topline growth better than that of Infosys or HCL Tech, intact profitability, higher operationalisation and a positive outlook on deal wins. The company has been outperforming consistently even in an environment that is constantly evolving and we maintain our positive outlook on TCS. Currently, TCS is trading at a trailing PE of 21.21x while Infosys is at 14.72x.