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TCS Q3FY21 Stock Analysis

TCS Q3FY21 Stock Analysis

Published on 13 January 2021 Views 91 Comments 3

Introduction 

 Recently, TCS came out with Q3FY21 results and registered a 7.2% YoY growth in net profits.  Let us do a 5- point results analysis of TCS stock in this blog. 

TCS Q3FY21 Results - 5 Point Analysis 

1. Revenue Highlights 

  • Company posted muted growth on YoY basis and healthy growth sequentially in cc terms. 
  • Key drivers for this strong growth are as follows:
    •  Growing demand for Core transformational services : TCS is a key beneficiary of higher cloud adoption and digital adoption
    • Strong Revenue Conversion from earlier deals
    • Moreover, TCS is a direct beneficiary of consistent market share loss of key players – Capgemini, Cognizant etc.
TCS Q3FY21 Revenue Highlights
















2. Profitability Highlights 

  • Company’s operating profit is increasing continuously over the past few quarters.
  • This has resulted into healthy operating profit margins over the recent quarters.
  • Operating profit expansion has also translated into healthy net profit margins for the company over the recent quarters.
  • Along with healthy operating profit generation, company has healthy cashflow from operations to the tune of INR 11,952 crore which is 134% of its net profit.
  • Key drivers for operating profit expansion are:
    • Strong growth across all the verticals
    • Operational benefits from Transformative operating model framework i.e. SBWS Model (Secure Borderless Workplaces Model) : 25-25 Strategy Announced by TCS.  
TCS Q3FY21 Profitability Highlights

















3. Revenue Mix 

  • Geography Mix – As seen company derives majority (~50%) of its revenues from North America.  
TCS Geography Mix


















  • Segment Mix – BFSI remains the key contributor followed by retail, life sciences  & healthcare and others.  
TCS Segment Mix





















4. Client Parameters 

  • There were no major changes in number of clients for the company in this quarter. 
TCS Client parameters

















5. People 

  • Company currently has 4,69,261 employees and there was a net addition of 15,721 employees in this quarter.
  • By 2025, TCS is planning to implement 25-25-25 strategy, meaning 25% workforce will work from office and remaining will work from home.
  • This will result in further expansion of profitability margins as most of the overhead costs will be saved.
  • Company also has all-time low attrition in IT services of 7.6%  in this quarter.  
TCS People Highlights



















Valuation 

  • As seen, stock is currently trading at quite premium valuations as compared to its historical PE multiples.
  • Currently the stock valuations look euphoric, however the stock may rally if the rally in market continues. 
TCS Valuation

 













 
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