TCS share price soars 4% after strong Q3FY25 results. Do you own?

Tata Consultancy Services (TCS) share price gained more than 4% in the morning trade on Friday, January 10, following the IT major's Q3 earnings and dividend announcement.

The IT behemoth reported a 12% increase in its December quarter consolidated net profit, which came to ₹12,380 crore as against ₹11,058 crore during the same period last year.

The company's consolidated revenue from operations increased by 5.6% year-on-year, reaching ₹63,973 crore. In constant currency (CC) terms, revenue grew by 4.5%.

The operating margin was 24.5%, reflecting a decrease of 50 basis points year-on-year. However, it showed an improvement of 40 basis points quarter-on-quarter.

Following the earnings announcement, TCS share price rose as much as 4.7% on the BSE to ₹4227.70

Should you buy TCS shares post Q3 results?

TCS's 3Q results were in line with estimates of Jefferies India. Analysts said they were encouraged by management comments on early signs of revival in discretionary spending (esp. in North America BFSI) and healthy order book. Moreover, the ramp-down of the BSNL deal may provide scope to improve margins, said the brokerage.

Jefferies maintained its earnings estimates and expects a 9% earnings per share growth (CAGR) over FY25-27. At 27 times price-to-earnings, valuation is attractive and factors in the near-term growth headwinds, said Jefferies India.

“Despite a seasonally weak quarter, the IT behemoth reported a decent uptick in its financials on a year-on-year basis. However, the company failed to meet the street estimates on all fronts, albeit marginally,” said Sagar Shetty, Research Analyst, StoxBox. 

The company could not attain its aspirational margin range of 26-28%, which now seems even more aspirational to reach as the fiscal almost ends, Shetty observed. 

A significant tailwind during the quarter would be the healthy TCV (total contract value) of $10.2 billion (up 26% YoY), which underscores healthy revenue visibility as the scenario of deal leakages going ahead is unlikely, as per Shetty.

“With the revival in discretionary spending in some verticals, we remain optimistic about the company's outlook. Management's view on the demand environment following the US administration change, outlook on deal pipeline and margin guidance would be key,” Shetty added.

Anshul Jain, Head of Research at Lakshmishree Investment and Securities said, “With a focus on stabilising attrition and optimising margins, the firm remains poised for sustained long-term growth in the competitive IT landscape.” I expect some buying buzz in TCS share in every dip post-Q3FY25 results, said Jain.

Technical View

TCS's share price has made a strong base at ₹3,980 apiece, and the stock looks strong on the technical chart pattern, said Mahesh M Ojha, AVP — Research at Hensex Securities.

So, TCS shareholders are advised to hold the scrip for the short-term targets of ₹4,150 and ₹4,250 and fresh investors can also buy TCS shares at the current market price, maintaining a strict stop loss at ₹3,980 per share, he added.

Dividend announcement

TCS declared a third interim dividend of Rs10 and also and special dividend of ₹66 per share of Rs1 face value each of the company. This amounts to a total dividend of ₹76 per share.

While the record date for this purpose of dividend distribution is set on Friday, January 17, 2025, the third interim dividend and the special dividend shall be paid to the equity shareholders of the company on Monday, February 3, 2025.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.