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TCS – Q1 Analysis – Flat Revenues

July 17, 2008

India’s number one IT Services and Consulting Company, TCS reported flat revenues $1,525m which were below consensus estimates. EBITDA margins were 22.1%. TCS reported lower than expected forex loses boosting Net Profit for Q! FY09 to Rs 12.4b.

Volumes increased 1.3% while blended pricing declined ~90bp qoq. Decline in pricing was due to lower product revenues and less revenues from transformational deals. The company said that it has signed ~12 large deals in Q1 and is working on 20 more such deals which are still in the pipeline.

The management does expect growth to revert in the coming quarters. TCS trades at ~13x FY09E, which is close to historic lows and at ~18% discount to Infosys. For FY09 the company is expected to report an EPS of Rs 60.

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