Add Wipro Ltd For Target Rs.482 - Yes Securities
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Muted operating performance in the quarter; Deal booking remained strong
Our view and valuation
Overall, it reported muted performance for the quarter. The reported revenue and EBIT margin for the quarter were below estimates. The demand environment continues to remain strong as deal booking for Q1FY23 at $1.1bn, was up 32% YoY and the deal pipeline remains at all time high. Attrition has started moderating and that will ease off pressure on margin. The new business strategy with focus on deeper connect with clients seems to be working fine. We expect EBIT margin tractor to improve in medium term led by improving employee pyramid and positive operating leverage. The Q2FY23 revenue growth guidance of 3-5% QoQ appears strong. We estimate revenue CAGR of 12.5% over FY22-FY24E, with average EBIT margin of 16.4%
The stock trades at PER of 15.8x on FY24E EPS. We maintain ADD Rating on the stock with revised target price of Rs 482/share, valuing it at 18.5x on FY24E EPS.
Result Highlights
* Reported IT services revenue of $2,736mn( up 0.5% QoQ in USD terms; up 2.1% QoQ in CC terms). The growth was led by Consumer vertical( up 3.9% QoQ); and Communications( up 5.1% QoQ). The global business lines include IDEAS(61.9% of revenue), ICORE(38.1% of revenue)
* Consolidated EBIT margin declined by 200 bps QoQ to 14.3%, led by supply side constraints and higher other expenses( up 8.4% QoQ). IT Services EBIT margin declined by 200bps QoQ to 15.0% ? Reported deal booking TCV of $1.1bn for the quarter( up 32% YoY), that included 18 large deals
* Offshore revenue mix grew 40 bps QoQ to 58.7%. Added 164 new clients in the quarter compared to 116 in Q4FY22.
* Added 15.4k employees in the quarter to reach headcount of 258.6k. Utilization( excluding trainees) was down 140 bps QoQ to 83.8%. LTM attrition was down 50bps QoQ to 23.3%. ? Provided strong revenue growth guidance of 3% to 5% QoQ in USD terms for Q2FY23. Rs mn A
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