TCS Share Price: Tata Consultancy Services (TCS) share price skyrocketed by nearly 5% despite muted Q3 earnings, however, investors take comfort in better outlook. TCS crossed Rs 4,200 mark, emerging among top performers of BSE and NSE. Brokerage Kotak Institutional Equities have recommended to Add TCS with target price seen at Rs 4,500.

TCS Share Price:

At the time of writing, TCS share price traded at Rs 4207.40 apiece on BSE, up by 4.23% with market value at Rs 15,24,842.98 crore on BSE.

Overall, the largest tech stock zoomed by 4.73% on BSE, with m-cap surging by as much as Rs 69,081 crore to nearly Rs 15.30 lakh crore, compared to over Rs 14.60 lakh crore m-cap on January 9.

The stock moved closer to its 52-week high of Rs 4,585.90 apiece.

TCS Q3 Results:

The Tata Group-backed flagship company earned consolidated net profit of Rs 12,380 crore in the third quarter ending period December 31, 2024. The profit was attributable to owners of the company. The PAT was up by 11.95% YoY and 3.95% QoQ.

Further, consolidated revenue from operations stood at Rs 63,973 crore in Q3FY25, higher from Rs 60,583 crore in Q3FY24, but marginally down from Rs 64,259 crore in Q2FY25. The company posted 4.5% YoY revenue growth in constant currency.

TCS Interim Dividend:

Furthermore, the tech player announced a third interim dividend of INR 10 and a special dividend of INR 66 per Equity Share of INR 1 each of the Company. The announcement was made during a board meeting held on January 9 for its third quarterly earnings for FY25 (Q3FY25).

In total, TCS will pay a whopping Rs 76 per share dividend to its investors.

The third interim dividend and the special dividend shall be paid on Monday, February 3, 2025, to the equity shareholders of the Company, whose names appear on the Register of Members of the Company or in the records of the Depositories as beneficial owners of the shares as on Friday, January 17, 2025, which is the Record Date fixed for the purpose, as per the regulatory filing.

Earlier, for FY25, TCS paid a second interim dividend of Rs 10 per share and its ex-date was on October 18. The first interim dividend payout of Rs 10 per share was carried out in July 2024.

TCS Share Price Recommendation:

In its review report, Kotak Institutional Equities highlighted that TCS’ quarterly results were muted. It mentioned that TCS reported flat qoq revenues in c/c terms (KIE: 0.1%). Emerging markets led growth with the India and MEA businesses growing 8.2% and 7.7%, respectively, in USD terms qoq. BSNL revenues declined marginally qoq. Growth was at 4.5% yoy. Nearly all verticals were flat or declined qoq.

The brokerage attributes weak BFSI and Continental Europe to the potential revenue decline from a German bank.
Adjusted EBIT margin increased 40 bps to 24.5% (KIE: 24.4%). Adjusted net
profit stood at Rs124 bn, up 4% qoq and 12% yoy.

But better FY26 growth is expected which is key positive for TCS. Kotak’s note said, “Deal TCV, at US$10.2 bn, up 18.6% qoq, impressed us, given that the tenure is marginally lower than earlier quarters. These are early signs of discretionary spending recovery. Management indicated strength in financial services, improvement in retail, and bottoming out in manufacturing/auto and life sciences.”

Kotak’s note added, “The view is consistent with our view of recovery in FY2026, though we believe that growth is unlikely to reach normalized levels. We expect discretionary spending to recover faster in the US than in Europe. We believe CY2025/FY2026 will see more legacy modernization efforts by enterprises. Replacing legacy code with the new technology stack is essential to reap the full benefits of investments. Companies postponed legacy modernization due to high risks and costs involved earlier, but are more willing to invest now. TCS is well-positioned to capitalize on the available opportunities.”

Also, the brokerage expects the BSNL deal to ramp down sharply after 4QFY25. The deal will contribute a 3.2% revenue growth in FY2025E, but will be a 3.6% growth headwind in FY2026E. However, the EBIT margin was impacted by 100 bps in FY2025E and would normalize in FY2026E (assuming nil deal margin).

On the valuation, Kotak’s note said, “We cut FY2025-2027E c/c revenue estimates by 1-3%, leading to similar EPS cuts after incorporating revised INR/USD estimates, according to KIE’s economist. We expect TCS to bounce back in FY2026 from weak growth of 1.1%
ex-BSNL in FY2025E. Strong deal wins is a good beginning.” Hence, the brokerage advised to ADD TCS share price with target price of Rs 4,550.

As per Trendlyne data, the consensus recommendation from 43 analysts for Tata Consultancy Services Ltd. is BUY. Of the total, 15 analysts have suggested STRONG BUY, and 11 experts have recommended BUY on TCS stock.