📢 5 STEPS TOWARDS WEALTH 🚀 The Indian Stock Market Way
TCS: 4149: Sales Growth Long Term: 16% | 9M_fy25Sales: 5.2% | 9M_FY25 Result Update
#### Company Overview
Tata Consultancy Services (TCS) is a leading global IT services, consulting, and business solutions organization. The company is renowned for its high-quality services and innovative solutions in IT and digital transformation. Tata Consultancy Services has been partnering with many of the world’s largest businesses in their transformation journeys for over 50 years. TCS offers a consulting-led, cognitive powered, integrated portfolio of business, technology and engineering services and solutions. TCS is the largest IT services company In India by market capitalization almost 15 lakh Cr. It is a subsidiary of the Tata Group and operates across 55 countries. TCS is the second-largest Indian company by market capitalization (Only 2nd to Reliance) and is among the most valuable IT services brands worldwide.
#### Industry Outlook
The IT services industry is experiencing significant transformations with an increased focus on digital and cloud services. The demand for AI, machine learning, IoT, and cybersecurity solutions is driving growth. Companies are investing heavily in these technologies to stay competitive and meet the evolving needs of their clients.
**Peer Group Comparison**
- TCS continues to lead in terms of profitability and revenue scale compared to Indian peers like Infosys, Wipro, and HCL Technologies, maintaining higher margins and market share. Its revenue from international markets (particularly North America and Europe) places it at the top of the Indian IT services industry.
### TCS Historical Performance
- *FY_2005*: Sales 8000 Cr, Profits: 1800 Cr, Price: 150 (Just came with the IPO in fy_04)
- *FY_2010*: Sales 30,00 Cr, Profits: 7000 Cr, Price: 400 Consistent Dividends Payout of 30% Profits.
- *FY_2015*: Sales 95,00 Cr, Profits: 19,000 Cr, Price: 1300 Consistent Dividends Payout of 75% Profits.
- *FY_2020*: Sales 1.6 Lakh Cr, Profits: 32,000 Cr, Price: 1800 Consistent Dividends Payout of 85% Profits.
- *FY_2024*: Sales 2.4 Lakh Cr, Profits: 46,000 Cr, Price: 3900 Consistent Dividends & Buyback Payout of 95% Profits.
We saw strong sales growth of 20% CAGR which is 30X during last 19 years, Profit growth of 19% CAGR which is 25X and hence we saw the price appreciation of 19% CAGR which is around 30X along with high & consistent dividends which will be almost equal to the invested amount just in 2-3 Years. This is the example of Great wealth creation.
### Current Trend:
Considering the Global muted economy there was a clear slow down in the whole Industry for last 2 years. Hiring stopped last year and large layoffs were seen during the previous 2 years which again is in uptrend from last 2 quarters. Since the beginning of the year fy_24 we saw muted sales growth which stayed for the full year. Last year CC Growth was just 3.4% and Sales growth was 6.8% which even went lower during Q4_fy24 Results. Q4 came up with the worst quarter as CC Growth was just 2.2% and sales growth of 3.5%. However improvements were seen during both quarters recently.
#### TCS's Q3 FY25:
1. Revenue and Growth 📈
Constant Currency (CC) Growth: TCS reported a revenue of ₹63,973 crore, marking a 5.6% year-over-year (YoY) growth v/s 6.5% growth we saw during H1_fy25 and a 4.5% growth in constant currency terms again which was 5.5% during Q2. Weakness Continues in Q3 with good promise for Fy_26.
Segment and Regional Performance: Notable growth in consumer business (+1.1% CC), energy, resources, and utilities (+3.4% CC), with significant regional growth in India (+70.2% CC) and the Middle East & Africa (+15.0% CC). India Outshines in continuity.
2. Profitability 💰
Net Income and Margins: TCS achieved a net income of ₹12,380 crore, a 5.5% increase YoY. Operating margin stood at 24.5%, showing a sequential improvement of 40 basis points, though there was a decline of 50 basis points YoY.
Profit Margins Comparison: Q3 FY25's net margin was reported at 19.4%, illustrating stable profitability across the quarters.
3. Employee Metrics 👥
Workforce Strength: Total employee count reached 607,354 with a last twelve months (LTM) IT services attrition rate of 13.0%. 5370 Jobs have been cut.
Diversity and Inclusion: Women constituted 35.3% of the workforce, encompassing 152 nationalities, indicating TCS's commitment to a diverse and inclusive workplace.
4. Order Book and TCV 📚
Total Contract Value (TCV): Strong TCV recorded at US$10.2 billion with a book-to-bill ratio of 1.4, positioning TCS well for sustained long-term growth.
5. Key Performance Indicators (KPIs) and Industry Comparison 📊
Client Initiatives: Emphasis on technology modernization and business transformation. Sectors like Cyber Security, AI.Cloud, and TCS Interactive led the growth.
Market Performance: TCS maintained a leadership position in multiple industry assessments, reflecting its strong market presence and client trust.
6. Financial Ratios and Valuation 💹
Profitability Ratios: Consistent net income growth and stable profit margins highlight effective cost management and operational efficiency.
Valuation at Price 4037: Given the solid financial performance and strategic investments in talent and technology, the current valuation suggests a stable investment outlook. However, detailed financial ratios such as P/E stands at 30 which is high in comparison to growth, ROE stands strong at 49% due to high profitability in relation to Equity.
7. Outlook 🔮
Short-Term: The solid TCV and robust client engagements across diverse industries provide positive momentum heading into the next quarters.
Long-Term: TCS’s ongoing investments in AI, digital transformations, and global expansion, particularly in high-growth markets like India and the Middle East, align well with long-term growth prospects.
Summary 🌟
The Q3 FY25 results for TCS show the continuity in slowdown performance across key financial metrics, a strong order book but it needs more growth, and workforce which has decreased by 5370 even in Q3 is not a good sign. The company's strategic focus on digital and cloud services, along with significant investments in AI, positions it well for future growth both in the short and long term.
#### Estimates
Revenue growth for this year could be around 7% while Profits could grow by 8%. This year we may see TCS Cross 50000 Cr Profits becoming 3rd Company at the benchmark after Reliance & SBI. Share is currently trading near the valuations of 31 PE which is Little bit higher than its FairPe of 26.
As we have been recommending this company for a long time, all those holding the company since long or are even currently doing the SIP, can book some 5% Profits near 4744 while new buying again can be done during any fall near 3386.
#### Company Future Outlook
TCS is well-positioned to leverage the growing demand for digital transformation services. The company's focus on innovation, client relationships, and strategic investments in emerging technologies like AI and IoT will drive future growth. The expansion of delivery centres and partnerships will further strengthen its market position. We may see TCS reach 5 lakh Cr Sales and 1 Lakh Cr Profits around FY2032. Overall Multiyear rally could be expected along with high and consistent dividends.
#### Disclosure:
Do not Buy or Sell before watching & understanding the data on your own.
