TCS 2017-18 Annual Report Analysis

Sat, 31 Mar

TCS has announced its results for the year ended March 2018. Let us have a look at the detailed performance review of the company during FY17-18.

TCS Income Statement Analysis

• Operating income during the year rose 4.4% on a year-on-year (YoY) basis.
• The company's operating profit increased by 0.6% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 26.4% in FY18 as against 27.4% in FY17.
• Depreciation charges increased by 1.4% and finance costs increased by 62.5% YoY, respectively.
• Other income declined by 13.7% YoY.
• Net profit for the year declined by 1.8% YoY.
• Net profit margins during the year declined from 22.3% in FY17 to 21.0% in FY18.

TCS Income Statement 2017-18

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Net Sales	Rs m	1,179,660	1,231,040	4.4%
Other income	Rs m	42,210	36,420	-13.7%
Total Revenues	Rs m	1,221,870	1,267,460	3.7%
Gross profit	Rs m	323,110	325,160	0.6%
Depreciation	Rs m	19,870	20,140	1.4%
Interest	Rs m	320	520	62.5%
Profit before tax	Rs m	345,130	340,920	-1.2%
Tax	Rs m	81,560	82,120	0.7%
Profit after tax	Rs m	263,570	258,800	-1.8%
Gross profit margin	%	27.4	26.4
Effective tax rate	%	23.6	24.1
Net profit margin	%	22.3	21.0

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TCS Balance Sheet Analysis

• The company's current liabilities during FY18 stood at Rs 178 billion as compared to Rs 145 billion in FY17, thereby witnessing an increase of 22.9%.
• Long-term debt down at Rs 540 million as compared to Rs 710 million during FY17, a fall of 23.9%.
• Current assets rose 1% and stood at Rs 812 billion, while fixed assets rose 8% and stood at Rs 216 billion in FY18.
• Overall, the total assets and liabilities for FY18 stood at Rs 1,028 billion as against Rs 1,004 billion during FY17, thereby witnessing a growth of 2%.

TCS Balance Sheet as on March 2018

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Networth	Rs m	862,140	851,280	-1.3
Current Liabilities	Rs m	145,120	178,280	22.9
Long-term Debt	Rs m	710	540	-23.9
Total Liabilities	Rs m	1,004,240	1,028,470	2.4
Current assets	Rs m	803,160	812,240	1.1
Fixed Assets	Rs m	201,080	216,230	7.5
Total Assets	Rs m	1,004,240	1,028,470	2.4

TCS Cash Flow Statement Analysis

• TCS's cash flow from operating activities (CFO) during FY18 stood at Rs 251 billion on a YoY basis.
• Cash flow from investing activities (CFI) during FY18 stood at Rs 29 billion on a YoY basis.
• Cash flow from financial activities (CFF) during FY18 stood at Rs -269 billion on a YoY basis.
• Overall, net cash flows for the company during FY18 stood at Rs 13 billion from the Rs -27 billion net cash flows seen during FY17.

TCS Cash Flow Statement 2017-18

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-17	Mar-18
Cash Flow from Operating Activities	Rs m	252,230	250,670	-0.6%
Cash Flow from Investing Activities	Rs m	-167,320	28,860	-
Cash Flow from Financing Activities	Rs m	-110,260	-268,850	-
Net Cash Flow	Rs m	-26,980	12,860	-

Current Valuations for TCS

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 135.2, an improvement from the EPS of Rs 133.8 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 2,849.3, stands at 40.3 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 6.2 times, while the price to sales ratio stands at 4.3 times.
• The company's price to cash flow (P/CF) ratio stood at 18.9 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Sales per share (Unadj.)	Rs	598.7	643.1
TTM Earnings per share	Rs	133.8	135.2
Diluted earnings per share	Rs	72.0	70.7
Price to Cash Flow	x	31.4	18.9
TTM P/E ratio	x	33.8	40.3
Price / Book Value ratio	x	5.5	6.2
Market Cap	Rs m	4,723,805	5,273,671
Dividends per share (Unadj.)	Rs	47.0	50.0

Ratio Analysis for TCS

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 4.6x during FY18, from 5.5x during FY17. 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 656.6x during FY18, from 1,079.5x during FY17. 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 declined and down at 30.4% during FY18, from 30.6% during FY18. 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 40.1% during FY18, from 40.0% during FY17. 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 declined and down at 25.2% during FY18, from 26.3% during FY17. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Current ratio	x	5.5	4.6
Debtors’ Days	Days	7	7
Interest coverage	x	1,079.5	656.6
Debt to equity ratio	x	0.0	0.0
Return on assets	%	26.3	25.2
Return on equity	%	30.6	30.4
Return on capital employed	%	40.0	40.1

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 up from Rs 2,431.1 to Rs 2,849.3, registering a gain of Rs 418.2 or around 17.2%.

Meanwhile, the S&P BSE IT Index is trading at Rs 12,100.6 (down 0.3%). Over the last one year it has moved up from 10,365.5 to 12,100.6, a gain of 1,735 points (up 16.7%).

Overall, the S&P BSE SENSEX is up 12.1% 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