TCS 2018-19 Annual Report Analysis

Sun, 31 Mar

TCS has announced its results for the year ended March 2019. Let us have a look at the detailed performance review of the company during FY18-19.

TCS Income Statement Analysis

• Operating income during the year rose 19.0% on a year-on-year (YoY) basis.
• The company's operating profit increased by 21.5% YoY during the fiscal. Operating profit margins witnessed a fall and down at 27.0% in FY19 as against 26.4% in FY18.
• Depreciation charges increased by 2.1% and finance costs increased by 280.8% YoY, respectively.
• Other income grew by 18.4% YoY.
• Net profit for the year grew by 22.0% YoY.
• Net profit margins during the year grew from 21.0% in FY18 to 21.5% in FY19.

TCS Income Statement 2018-19

No. of Mths Year Ending		12 Mar-18*	12 Mar-19*	% Change
Net Sales	Rs m	1,231,040	1,464,630	19.0%
Other income	Rs m	36,420	43,110	18.4%
Total Revenues	Rs m	1,267,460	1,507,740	19.0%
Gross profit	Rs m	325,160	395,060	21.5%
Depreciation	Rs m	20,140	20,560	2.1%
Interest	Rs m	520	1,980	280.8%
Profit before tax	Rs m	340,920	415,630	21.9%
Tax	Rs m	82,120	100,010	21.8%
Profit after tax	Rs m	258,800	315,620	22.0%
Gross profit margin	%	26.4	27.0
Effective tax rate	%	24.1	24.1
Net profit margin	%	21.0	21.5

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TCS Balance Sheet Analysis

• The company's current liabilities during FY19 stood at Rs 221 billion as compared to Rs 178 billion in FY18, thereby witnessing an increase of 23.9%.
• Current assets rose 13% and stood at Rs 921 billion, while fixed assets fell 7% and stood at Rs 202 billion in FY19.
• Overall, the total assets and liabilities for FY19 stood at Rs 1,123 billion as against Rs 1,028 billion during FY18, thereby witnessing a growth of 9%.

TCS Balance Sheet as on March 2019

No. of Mths Year Ending		12 Mar-18*	12 Mar-19*	% Change
Networth	Rs m	851,280	894,460	5.1
Current Liabilities	Rs m	178,280	220,840	23.9
Long-term Debt	Rs m	540	0	-100.0
Total Liabilities	Rs m	1,028,470	1,122,870	9.2
Current assets	Rs m	812,240	921,310	13.4
Fixed Assets	Rs m	216,230	201,560	-6.8
Total Assets	Rs m	1,028,470	1,122,870	9.2

TCS Cash Flow Statement Analysis

• TCS's cash flow from operating activities (CFO) during FY19 stood at Rs 286 billion, an improvement of 14.1% on a YoY basis.
• Cash flow from investing activities (CFI) during FY19 stood at Rs 16 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY19 stood at Rs -279 billion on a YoY basis.
• Overall, net cash flows for the company during FY19 stood at Rs 23 billion from the Rs 13 billion net cash flows seen during FY18.

TCS Cash Flow Statement 2018-19

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-18	Mar-19
Cash Flow from Operating Activities	Rs m	250,670	285,930	14.1%
Cash Flow from Investing Activities	Rs m	28,860	15,960	-44.7%
Cash Flow from Financing Activities	Rs m	-268,850	-278,970	-
Net Cash Flow	Rs m	12,860	23,410	82.0%

Current Valuations for TCS

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 84.1, an decline from the EPS of Rs 135.2 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 2,000.4, stands at 23.2 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 8.2 times, while the price to sales ratio stands at 5.1 times.
• The company's price to cash flow (P/CF) ratio stood at 30.1 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-18*	12 Mar-19*
Sales per share (Unadj.)	Rs	643.1	390.3
TTM Earnings per share	Rs	135.2	84.1
Diluted earnings per share	Rs	70.7	86.3
Price to Cash Flow	x	37.4	30.1
TTM P/E ratio	x	40.3	23.2
Price / Book Value ratio	x	6.2	11.3
Market Cap	Rs m	5,273,671	10,106,861
Dividends per share (Unadj.)	Rs	50.0	30.0

Ratio Analysis for TCS

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 4.2x during FY19, from 4.6x during FY18. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at 210.9x during FY19, from 656.6x during FY18. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company improved and stood at 35.3% during FY19, from 30.4% during FY19. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 46.7% during FY19, from 40.1% during FY18. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company improved and stood at 28.3% during FY19, from 25.2% during FY18. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-18*	12 Mar-19*
Current ratio	x	4.6	4.2
Debtors’ Days	Days	7	7
Interest coverage	x	656.6	210.9
Debt to equity ratio	x	0.0	0.0
Return on assets	%	25.2	28.3
Return on equity	%	30.4	35.3
Return on capital employed	%	40.1	46.7

To see how TCS has performed over the last 5 years, please visit here.

TCS Share Price Performance

Over the last one year, TCS share price has moved down from Rs 2,849.3 to Rs 2,000.4, registering a loss of Rs 848.9 or around 29.8%.

Meanwhile, the S&P BSE IT Index is trading at Rs 15,280.3 (up 0.4%). Over the last one year it has moved up from 12,100.6 to 15,280.3, a gain of 3,180 points (up 26.3%).

Overall, the S&P BSE SENSEX is up 16.3% over the year.

(To know more, check out historical annual results for TCS and quarterly results for TCS)

Read: Latest Annual Report Analysis of TCS