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Steady topline growth: TCS revenue in rupee grew by 3.5% YoY and 1.1.% QoQ to Rs 61,237cr and revenue in dollar grew by 2.3% YoY and 1.1% QoQ to USD 7,363mn while revenue growth in constant currency was 2.2% YoY for Q4FY24. The growth in the quarter amongst geographies was driven by India & other regional businesses as well as UK while North America reported muted growth. Amongst industry manufacturing, energy and other regional markets led the growth while de-growth was seen in BFSI, consumer and technology industries. For FY24, constant currency growth came in at 3.4% while revenue in rupee stood at Rs 2,40,893cr, up by 6.8% YoY and revenue in dollar grew by 4.1% YoY to USD 29,080mn. Amongst geography, except for North America which saw a flat growth all the other markets reported positive growth while amongst industries consumer, life science, energy and manufacturing saw a growth while BFSI, technology and communication witnessed slowdown and de-grew in the range of 1-2.6% YoY in CC terms.

Robust margin expansion: Its EBIT witnessed a growth of 9.9% YoY and 5% QoQ to Rs 15,918cr and EBIT margins improved by 150bps YoY and 98bps QoQ to 26% which was in-line with management expectation. Its PAT came in at Rs 12,502cr, which grew by 9.3% YoY and 12.7% QoQ as it was adjusted for an exceptional item of Rs 958cr in Q3FY24. For FY24, its EBIT grew by 9.4% YoY to Rs 59,311cr with margin improvement of 56bps to 24.6%. PAT grew by 9% YoY to Rs 46,099cr with margin at 19.1%, an improvement of 37bps. Further, the management plan is to scale margins in between 26-28% and would be driven by cost optimization & saving, better operating efficiency and gaining long term deals.

Highest ever order wins: TCS won multi-year high deal for FY24 which stood at USD 42.7bn, an increase of 25.2% YoY (USD 34.1bn in FY23). In Q4FY24 its order book came in healthy at USD 13.2bn higher by 32% YoY (USD 10bn in Q4FY23) and 63% QoQ (USD 8.1bn in Q3FY24). Amongst deals, ~USD 19.6bn from North America, BFSI TCV was at USD 12.7bn and TCV of USD 5.8bn was from Consumer Business.

Attrition moderated further: In Q4FY24, TCS attrition continued to moderate to 12.5% from 13.3% in Q3FY24, a fall of 80 bps QoQ and was down by 760bps from 20.1% in Q4FY23. Management plan is to hire fresher’s, train them and continue to grow talent organically which would aid in maintaining attrition level as well as bring in more efficiencies.

Outlook & Valuation: TCS reported a healthy set of numbers for Q4FY24 with robust margin improvement and multi-year order win and this signals improving performance ahead. We believe clients currently are focusing on prioritizing projects that reduce cost and increase business agility, and would start its spending on discretionary projects in FY25. Further, we continue to remain optimistic on the growth of TCS given its leadership position, healthy portfolio and investment towards technologies and platform. Amongst the IT peers, our top pick is TCS and financially we have estimated its revenue/EBIT to grow at 11%/14.7% CAGR over FY24-26E. We maintain our Buy rating on the stock but revising the target price upwards to Rs 4,615 by assigning a P/E multiple of 27x on FY26E EPS.

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