TCS Q1FY19 Results

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*TCS Q1FY19 Results first cut: Results well ahead of estimate driven by recovery in BFSI vertical.

*Actual vs. expectations*

Revenue in CC terms were up 4.1% QoQ as against our expectation of 3.7%, OPM down 40bps as against our estimate of 140bps decline

*Likely stock reaction*

Positive – commentary on sustenance on momentum in BFSI vertical would be crucial.

*Result summary*

❇For Q1FY19, Revenues in reported terms grew by 6.8% QoQ to Rs342bn (inline with our estimate of Rs342bn) led by sustained traction in the Digital business up 9% QoQ in CC terms (45% in YoY terms – CC basis).

❇All verticals reported strong growth in the quarter. BFSI revenues grew by 3.7% QoQ – commentary here on the performance of large US bank clients could be crucial to watch out for

❇ EBIT Margins were down 40bps QoQ at 25% quite commendable given wage/visa impact which was part negated by favourable Fx.

❇ PAT grew by 6.3% QoQ at Rs73bn as against estimate of Rs69.2mn on better operating performance and better than expected other income (down 5% QoQ at Rs 9.3bn).

❇View: We believe the strong quarterly performance would support the current valuations of the company and further upside would largely be function of outlook on BFSI clients that may lead to earnings upgrade. In previous quarter the company said this will take couple of quarters for recovery, any optimism here can be crucial determinant.

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