12/07/2024- Tata Consultancy Services (TCS), India’s largest software services exporter, has reported a notable increase in net profit for the first quarter of the financial year 2024-2025. The company’s net profit rose by 9 per cent, reaching Rs 12,040 crore, up from Rs 11,074 crore in the same period last year.
Revenue from operations saw a 5 per cent increase, amounting to Rs 62,613 crore for the June quarter, compared to Rs 59,381 crore in the corresponding quarter of the previous fiscal year.
Comment
Manish Chowdhury, Head of Research, StoxBox
“TCS’ Q1FY25 result gave a mild surprise on the upside as sequential CC revenue growth of 2.2% reflected an improving business environment in the US. Large deals made in the last year seem to be getting converted into revenue along with the ramp-up of the BSNL deal. The lowering attrition and the net headcount addition is a major positive and augurs well for the company’s utilization levels and subsequently its EBIT margin. Despite wage hikes in the quarter TCS managed to report a beat on EBIT margin estimates. These positives are bound to lead to an upward revision in EPS estimates but not so much on the revenue side. Key moniterables going forward are 1) updates on the BSNL deal ramp-up; 2) medium-term industry demand trends and impact of macro headwinds on demand; 3) deal wins and deal pipeline; 4) revenue growth and margin outlook for FY25; 5) investments in GenAI partnerships.
Tata Consultancy Services Ltd. (TCS) Q1FY25 Result First Cut – Beat on all fronts, Lowering attrition and net headcount addition augurs well for margins
- Revenue rose 2.2% QoQ / 5.8% YoY in rupee terms to Rs. 62,613 crores, beating market estimates of Rs. 62,128 crores. This growth can be attributed to a strong rise in India revenue (up 61.8% YoY), BSNL deal ramp-up, and longer working days during the quarter.
- The EBIT margin came in at 24.7% (down 134 bps QoQ /up 146 bps YoY), beating street estimates of 24.5%, aided by higher utilization and a softer impact from the annual wage hikes. EBIT was down 3% QoQ and up 12.5% YoY to Rs. 15,442 crores, surpassing market expectations of Rs. 15,246 crores.
- Net income stood at Rs. 12,105 crores (down 3.2% QoQ /up 5.8% YoY), crossing market estimates of Rs. 11,959 crores. The PAT margin came at 19.3% (down 108 bps QoQ).
- LTM attrition trended downwards to 12.1% in Q1FY25 compared to 12.5% in Q4FY24, complemented by a net headcount addition of 5,452 employees.
- The board of directors has recommended an interim dividend of Rs. 10 per equity share. The record date for the dividend is 20 July 2024.
- Net cash from operations at Rs 11,168 which is 92.8% of net profit.
- TCS reported a workforce of 606,998 employees as on June 30, 2024.”
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