Wipro Ltd.s consolidated operating margin and profit beat estimates in a quarter where the company absorbed the impact of wage hikes and its core IT services business witnessed subdued growth. Consolidated sales of Wipro for the quarter ended Sep 2019 registered a growth of 2% from Rs 14786 crore in the sequential previous quarter ended June 2019. OPM expanded by marginal 60...

Revenue for Q2FY20 witnessed slow growth both YoY and sequentially (4.0% YoY/2.8% QoQ) in contrast to last quarter's topline performance. Though being the strongest performer historically, BFSIs revenue this quarter was below expectations with a muted revenue growth of 3.6% YoY. The management highlighted that it was mainly due to macroeconomic conditions and lower spending by banking and capital market clients and completion of large digital projects. Energy and Utilities segment grew by 3.6% YoY (6.3% CC) while Health Business Unit had a positive revenue growth of 3.36% YoY (0.58% QoQ), which was in contrast to last quarter's performance....

While Wipro continues to lag growth within Tier-1 IT, its relative growth underperformance has reduced with growth moderation of larger peers. We reckon that growth will continue to lag peers ahead based on soft outlook on ~52% of rev comprising BFSI (earlier a growth driver), Mfg (re-structuring ME) and Technology (semicon sub-segment). This is expected to be offset by relatively stronger outlook in Consumer, Healthcare (ex-HPS) and E&U (large deals). While slowdown concerns remain (BFSI/large accounts-led) with limited scope of margin expansion (SG&A normalisation). The stock has corrected ~6% in 3M (following the buyback trade) and valuations are at ~13.7x FY21E (vs. 14.1x Tier-1 IT median). We expect USD revenue growth of 2.4/5.7/6.4% and IT services EBIT% at 17.9/18.0/18.2% for FY20/21/22E. We maintain NEU on Wipro post in-line revenue and operating performance. Increased headwinds in BFSI/large accounts offset the improving outlook in Consumer/Healthcare. Our TP of Rs 230 is based on 12x Sep-21E EPS.

After remaining in double digit for around two years, WPRO's BFSI revenue growth decelerated sharply to 5.9% YoY CC owing to the completion of some large programs and the weakness in capital markets (in the US and Europe). Apart from this, HPS in healthcare remained another pocket of concern and is built in the company's revenue growth guidance of 0.8%-2.8% QoQ for 3QFY20. In dollar terms, revenue increased by 0.5% QoQ, implying a cross-currency IT Services EBIT margin shrank 30bp QoQ to 18.1%, 60bp below our estimate of PAT grew 12% YoY to INR25.6b a 14.4 % beat due to higher revenue in product business and lower ETR (18.3% vs. Weakness is more in Europe than in US, and more on Growth in healthcare vertical is coming, barring HPS; WPRO is recording good wins in digital.

WPRO: Puzzling margin beat; unlikely to hold up. Trade: Trade deficit narrows as imports shrink. Logistics: Demand climate deteriorates further

Wipro (WPRO) reported in-line revenue growth of 1.1% QoQ CC, but a surprising beat on operating margins (18.1%, +10bps QoQ vs. 60bps est.) that materialised despite the impact of compensation revision.

Similar to TCS and Infosys, the Wipro management also has a cautious stance on the trajectory of the banking and financial services segment due to weakness in the capital markets space and European banking. Further, a delay in both digital projects renewal and ramp up of new projects in top client could impact banking growth for Wipro in the near term. However, besides this, the outlook for major verticals was positive with retail, healthcare (outside HPS), energy & utilities and global communication looking healthy based on the deal pipeline. The qualitative commentary...

Wipro IT Services QoQ growth of 1.1% in 2QFY20 in constant currency (CC) was in line with our estimates of 1% - standing at the middle of its guided range (-1% to 1% QoQ growth). The growth was driven by some of the deferred deals from 1QFY20 being executed this quarter and good momentum in verticals like Consumer, ENU and Manufacturing. Based on a better order book, the revenue guidance for 3QFY20 at 0.8%-2.8% in CC terms, is a tad better than our and market's expectation. As is the trend in the industry, there was greater focus on operational efficiency. EBIT margin of 18.1% (in IT Services) increasing by 310bps YoY (our estimate ~17%) was a positive surprise against headwinds of increase in salaries (two extra months), a more localised workforce...

Q3FY20 guidance of IT services revenue growth of +0.8% to +2.8% is in-line with our expectation. WPRO expects the QoQ improvement in order-book in Q2FY20 to enable it to drive improvement in growth despite seasonal headwinds. We maintain our FY20/21E revenue. We factor the EBIT margin beat and fine-tune our FY20/21E EPs by 3%/2.7%. We now forecast IT services revenue (in US$) and EPS CAGR of 4.5% and 6.6% respectively over FY19-21E. We upgrade WPRO to ACCUMULATE from HOLD with a new TP of Rs269 (s. Rs260 earlier) based on PER of 15x FY21E. Key Highlights and Investment Rationale...

Wipro delivered mixed set of numbers in Q2FY2020. The company delivered in-line revenue performance, while margins performance remained above our modest expectations considering salary revision and decline in utilisations. Constant currency (CC) revenue grew by 1.1% q-o-q, driven by strong performance in consumer and manufacturing vertical on a q-o-q basis. However, BFSI growth continued to remain muted owing to weakness in European banking and overall capital market. EBIT margin for IT services declined 30bps q-o-q to 18.1%, ahead of our estimates. Net profit of Rs....

booking & will impact on revenue conversion of deals. Inconsistency & volatility of revenue growth in Wipro among its key vertical makes us cautious. We believe IT companies will have to invest in digital & people to participate in the strong demand environment. Wipro's management aggressive cost rationalization keeps us skeptical about their participation in demand environment & hence will restrict their revenue momentum. Wipro's key verticals continue to be under pressure due to client-specific challenges (BFSI vertical), company-specific challenges (manufacturing...

Wipro witnessed 1.8% QoQ declines in IT Services revenue in Q1FY20 in dollar terms (-0.7% QoQ in CC terms and within the guided range of -1.0% to +1.0%). Sequential declines were primarily driven by weaker contribution from health business (-2.1% QoQ) and manufacturing business (-1.2%). Meanwhile, Consumer business continued to witness strong growth (+6.9% QoQ), followed by BFSI (+2.9%) and technology vertical (+1.4%). Geographically, revenue growth in India remained strong (+12.0% QoQ), which was more than offset by slowness in all other regions with ROW declining...

Wipro is struggling to grow (+2.9% YoY in FY19) whereas larger peers are clocking double digit growth rate. BFSI, which was the key revenue driver for Wipro is witnessing slowdown. Issues such as (1) Completion of large projects (Consumer), (2) Delay in decision making (BFSI, Manufacturing) and (3) Deferral in ramp-up of large projects is impacting growth. The soft guidance for 2QFY20 indicates that the lag is entrenched. Margin expansion is difficult and the buyback trade is over. Wipro has underperformed in last 3M (-8% vs NIFTY IT -3%) and the trend will continue unless growth revives. We expect USD revenue growth of 3.0/5.4% and IT services EBIT% at 18.1/18.3% for FY20/21E. Wipro trades at 14.7x FY21E EPS (in-line with Tier-1 median), which is rich considering its growth profile. Our SELL stance is driven by the weakness in core growth metrics and execution challenges. Risk to our thesis include improved US/Europe macro and INR depreciation. We maintain SELL on WIPRO, post weak 1QFY20 and tepid guidance for 2Q. Wipros revenue growth remains the lowest in tier-1 IT. In view of growth challenges, peaking margins and taxation on buyback we further cut our target multiple. Our TP of Rs 220 is based on 12x (vs. 14x earlier) Jun-21E EPS.

Wipro's (WPRO) Q1FY20 IT Services and consolidated revenue growth was in-line with our forecast. EBIT margin of 16.2%, -80bps QoQ, was also in-line with our forecast. EPS of Rs3.97, -3.9%/+12.5% QoQ/YoY was a beat to our forecast aided by higher other income & FX gain and lower tax rate. Q2FY20 guidance of IT services revenue growth of 0% to +2% is in-line with our forecast. WPRO has got shareholders' approval for its share buyback of Rs105 bn for 323.1mn shares (5.4% of equity capital) and is awaiting approval from SEBI. It expects to complete the buyback by end-August, however it would monitor the final outcome...

IT services revenue de-grew 0.7% sequentially in constant currency. The revenue de-growth in Q1 and conservative revenue guidance for Q2FY20E (0-2% QoQ) was due to deferral of some deals and slower ramp ups of some projects. The impact of the same was most noticeable in the consumer business unit segment wherein revenues declined 4.4% QoQ. In addition, softness in capital markets and weakness in European banks continued to impact banking & financial services, similar to TCS & Infosys. Going forward, the consumer segment is expected to revive from Q2 onwards based on...

Wipro IT Services delivered QoQ decline of 0.7% in 1QFY20 in constant currency (CC) - at the lower end of its guided range (-1% to 1% QoQ growth). While 1Q has typically been weak, FY20 started out weaker than internal expectations due to both macro headwinds and Wipro specific client related issues. It was indicated that European BFSI, European manufacturing and US healthcare (especially HPS) remain spots of concern. There have been issues surrounding (1) Deferrals of deals (2) Slow decision making (3) Slow execution of already signed deals and (4) Having to share with clients productivity benefits gained from automation. In quite a few verticals there was discussion around large programs coming to an end and they not getting replenished in...

Wipro (WPRO) reported another tepid quarter as a wind-down of large projects in the retail & CPG ver

We believe that Wipro is struggling to achieve any degree of consistency. The timing of the recovery remains key & revenue growth of Wipro is never broadbased. The company's revenue growth has been below 1% (Q/Q CC) in 8 of the past thirteen quarters, suggesting that growth momentum is difficult to predict. We expect 4.5% & 7.3% USD revenue & EPS CAGR for FY19E-FY21E respectively & value Wipro at 14.5x Mar-21 earnings to arrive an changed...

Wipro delivered lower-than-expected revenue performance for Q1FY2020. However, adjusted EBIT IT margin remained a tad ahead of our estimates. Soft growth was due to weakness in the BFSI, consumer, healthcare and manufacturing verticals. BFSI growth was impacted by weakness in European Banking and overall capital market. However, management expects the healthcare vertical and engineering practices to bounce back during 2HFY2020E. Digital business reported strong growth during the quarter, contributing 37.4% to total revenue. Management has guided for...