InvestorQ : What are your expectations from the TCS quarterly results for the Dec-20 quarter?
vidhya Laxmi made post

What are your expectations from the TCS quarterly results for the Dec-20 quarter?

sarah Leo answered.
6 months ago

Each year, it is TCS that kicks off the earnings season announcing the results much before the rest of the pack and this quarter it is starting on the 08 of January post market trading hours. In a way, the numbers announced by TCS are supposed to be the bellwether for the entire technology pack in general and also for corporate India.

TCS has special importance in India as it is the second most valuable company in terms of market capitalization. The numbers for the third quarter ending December 2020 are expected to be extremely encouraging on the back of greater cloud adoption and on the strength of large digital deals they are estimated to have signed in the quarter.

In dollar terms, the revenues of TCS are likely to grow in the range between 3% and 4.5% while the net profit growth on a YOY basis is expected to grow anywhere between 3% and 8% based on early analyst estimates. One slight drawback could be the higher manpower costs which would mean that operating profit margins or OPM of TCS would take a hit.

Despite the manpower cost overhang, most analysts believe TCS would have benefited from cost control measures introduced by the group in general and the company in particular. However, at this point of time, it may be hard to measure the full impact of these cost cutting measures on the bottom line of the company as it may be spread out.

From an investment perspective; it must be noted that the stock of TCS has already rallied 14% in the Dec-20 quarter; although that is a lot lesser than the 20% rally in the Nifty and other key indices. Also, Infosys, Wipro and HCL Tech have done better than TCS in terms of market performance in Dec-20 quarter. Georgia could be an overhang on TCS sentiments.