TCS shares fall 3% intraday post disappointing Q3; brokerages revise target price

Shares of Tata Consultancy Services (TCS) slipped nearly 3 per cent after the IT major reported a lower-than-expected 14.2 per cent growth in net profit in the December quarter and warned of a not-so-rewarding final numbers for the fiscal year.

The stock ended 1.88 per cent lower after hitting an intraday low of Rs 2258.00, down 2.84 per cent on the Bombay Stock Exchange (BSE).

The software services firm recorded net profit at Rs 6,083 crore for October-December quarter as compared to Rs 5,328 crore in the October-December period of last fiscal.

The Mumbai-based IT firm failed to meet or beat revenue expectations over the last few quarters despite positive management commentary. Reacting to that, most domestic and international brokerages cut their target prices for the stock.

Global brokerage firm Goldman Sachs said the company reported results below expectations on revenue front with margins resilient.

The brokerage has cut target price to Rs 2600 from Rs 2670, but maintained ‘buy’ rating on the stock, saying sector-leading cash returns justified company’s 15 per cent premium.

Another international brokerage Morgan Stanley has cut target price to Rs 2410 from Rs 2565, and maintained ‘equal weight’ rating.

Broking firm SBICAP Securities said TCS stock is currently trading at 17.5x/15.6x on F17e/F18e earnings, and has corrected  nearly 10% over the last 3 months.

“The stock has corrected sharply, however, deceleration in growth momentum over last few quarters restricted us from taking a constructive view. We believe the stock price performance will hinge on acceleration in growth momentum,” added the brokerage.

SBICAP maintained ‘hold’ rating on the stock with a revised target price of Rs 2,600 at 18x December 2017 earnings.

Brokerage Angel Broking suggested the current weakness should be utilized by the investors to get into the stock with a long term view, as the business demand and order inflow remains intact and the company is confident of maintain its profitability, which has been the case.

The brokerage maintained ‘buy’ rating on the stock, but added the target price is under revision.