Brokerages cut TCS earnings, price targets

Mumbai: Several domestic and foreign brokerage firms slashed their earnings estimates and price targets on Tata Consultancy Services (TCS) after India's largest IT services company delivered a weaker-than-expected fourth-quarter earnings and gave a cautious commentary on trends in the immediate future.

For instance, JPMorgan maintained its underweight rating and slashed its revenue estimate by 1% and margin by 20 basis points (bps), resulting in a 2% EPS cut for the next fiscal. Its revised price target represents a 15% downside from the current levels.

Shares of TCS fell 1.6% to close at ₹3,189.85 apiece on the BSE, dragging the entire IT pack lower. The BSE IT index fell 591.97 points, or 2.05%, to close 28,235.20.

Citigroup maintained its sell rating and reduced its price target citing weaker-than-expected earnings and high valuations. "Management commentary turned incrementally cautious," it said.

Morgan Stanley maintained its price target but remained skeptical whether sentiment has troughed despite a strong order book. It further said that lower attrition-led margin tailwinds will be offset by weak operating leverage as it cut fiscal 2024 and fiscal 2025 EPS estimates by 1% each.

The sell-off in TCS shares was seen on Infosys, which also announced its Q4 earnings after market hours on Thursday. Its stock fell nearly 3%, while HCL Technologies and Tech Mahindra fell more than 2% each. LTIMindtree lost nearly 4%. Interestingly, CLSA said the quarterly performance of TCS was weak but the company's healthy order book reassured its mid-term outlook.