Fri Oct 11 16:28:46 UTC 2024: ## TCS Reports Challenging Q2, Brokerages Offer Mixed Views

**Mumbai, India:** Tata Consultancy Services (TCS), India’s largest IT services company, reported a challenging second quarter, with profit growth slowing to 5% year-on-year, reaching Rs 11,909 crore. While this marks a modest increase, it falls short of analysts’ expectations.

The performance has led to a mixed reaction from brokerage firms, with some expressing caution while others remain optimistic about the company’s long-term prospects.

Citigroup has maintained a “Sell” rating on TCS, citing a weak Q2 performance and lowered its target price to Rs 3935 from Rs 4010. The brokerage believes that the demand environment remains cautious and expects earnings per share (EPS) downgrades.

However, JPMorgan remains bullish, maintaining an “Overweight” stance on TCS with a revised target price of Rs 5100 from Rs 5200. Despite a 0.4% quarter-over-quarter revenue decline in constant currency terms, the firm expects growth to recover in the second half of the fiscal year, particularly from financial services and tech segments. They believe that margin improvement is likely as the margin-dilutive BSNL contract unwinds.

Investec has maintained its “Sell” rating on TCS, slightly raising its target price to Rs 3620 from Rs 3586. The firm highlights client-specific challenges in the Life Sciences and healthcare sectors, leading to a downward revision in its FY25 EPS forecast.

Despite the mixed outlook, some analysts remain optimistic about TCS’s long-term prospects, citing the potential for growth recovery in the IT sector as a whole.

**Key takeaways:**

* TCS reported a modest 5% growth in net profit for Q2, falling short of analysts’ expectations.
* Brokerages offer a mixed view, with Citi maintaining a “Sell” rating and JPMorgan remaining “Overweight.”
* Concerns remain about a cautious demand environment and client-specific challenges in certain sectors.
* However, some analysts believe that growth recovery is likely in the second half of FY25 and into FY26.

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