Wipro Limited (NSE:WIPRO) (BSE:507685)

Wipro Limited is a global information technology (IT), services Provider. The Company develops and integrates solutions that enable its clients to leverage IT in achieving their business objectives at competitive costs. The Company uses its quality processes and global talent pool to deliver time to development advantages, cost savings and productivity improvements. The Company’s business comprises of IT Services businesses, which provide a range of IT and IT-enabled services which include IT consulting, custom application design, development, re-engineering and maintenance, systems integration, package implementation, global infrastructure services, BPO services, research and development and hardware and software design to leading enterprises worldwide, and IT Products business segments provides a range of third-party IT products, which include computing, storage, networking, security and software products, including databases and operating systems.

Official website: www.wipro.com

Wipro posted a 1.1% qoq growth in its USD IT Services revenue to US$1,794.1mn V/s an expected US$1,770mn. Thus, the results have come in at the upper end of the guidance. In Constant Currency (CC) terms, the company posted a 0.2% qoq growth in its top-line for 1QFY2016. The EBDITA margin came in at 21.3% V/s an expected 23.0%; the EBIT margin came in at 18.5% V/s an expected 20.0%. Thus, the EBDITA margin and EBIT margin have dipped by 167bp and 144bp qoq, respectively. Consequently, the PAT came in at Rs2,188cr V/s an expected Rs2,261cr and V/s Rs2,272cr in 4QFY2015, ie a dip of 3.7% qoq. For 2QFY2016, the company expects revenues from the IT Services business to be in the range of US$1,821mn-US$1,857mn, implying a 1.5-3.5% growth qoq. We maintain our Buy rating on the stock with a target price of Rs719. Quarterly highlights: Wipro posted a 1.1% qoq growth in its USD IT Services revenue to US$1,794.1mn V/s an expected US$1,770mn. The EBDITA margin came in at 21.3% V/s an expected 23.0%; the EBIT margin came in at 18.5% V/s an expected 20.0%. Thus, the EBDITA margin and EBIT margin have dipped by 167bp and 144bp qoq. The IT services’ EBIT margin came in at 21.0%. The margin dip was mainly on account of currency impact and wage hikes. On the operating front the utilization level was at 71.3% V/s 70.5% in the sequential previous quarter, while attrition for the quarter stood at 16.4%. Consequently, the PAT came in at Rs2,188cr V/s an expected Rs2,261cr and Vs Rs2,272cr in 4QFY2015, a dip of 3.7% qoq. Outlook and valuation: The Management remains confident of the revenue growth pick-up sustaining, citing a pick-up in large deal closures and win rates, uptick in discretionary spending, strong business pipeline and momentum in demand from US sustaining. We expect USD and INR revenue CAGR for IT services to be at 10.0% and 11.8%, respectively, over FY2015-17E. We recommend a Buy rating on the stock.


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