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WPRO’s 4Q CC QoQ growth (-0.6%) came at the lower end of its guidance, missing estimates (JMFe/Consensus: 0%/-0.3%). WPRO’s quarter beginning conservatism now appears prophetic as most large peers’ growth decelerated in 4Q (and converged towards WPRO’s). However, unlike peers, WPRO’s large deal win momentum has accelerated. WPRO clocked second consecutive quarter of USD 4bn deal TCV (1.5x book-to-bill). Full year deal TCV grew by 28% YoY vs -1%/+3% for TCS/INFO. That said, order book to revenue conversion dichotomy stays and is reflected in a weak 1Q guidance of (3)-(1)% QoQ CC revenue decline. Discretionary spending cuts, higher share of consulting revenues and longer transition time of recent large deals are impacting near-term revenues. But it does not take away the large order book WPRO is sitting on which bodes well for growth once demand turns. WPRO is doing better on margin management vs peers as well (flat QoQ and guidance of maintaining margin), albeit at a lower starting point. A weak 4Q and soft 1Q guidance flows into our estimates resulting in 3-4% cuts in our FY24-25E USD revenue and 6-7% cuts to our PAT. However, buyback (and resulting lower equity base) broadly nullifies the impact on EPS. We lower our target multiple to 16x (from 18x) – in-line with cuts for other large peers (INFO/HCLT). We maintain BUY with a revised TP of INR 450 (from INR 480).

* 4QFY23 – topline miss; margin beat: Wipro reported -0.6% CC QoQ growth for IT Services business, missing JMFe/Street estimate of 0%/0.3%. Weakness in Telecom (- 2.5% CC QoQ), Technology (-2%) and BFSI (-1.2%) dragged growth down reflecting pressure on these end industries. Healthcare (+2.5%) and Energy & Utility (+8.2%) supported growth. IT Services’ EBIT margins were flat at 16.3%, ahead of JMFe/Consensus: 15.9%/16.2%. Consequently, PAT (at INR 30.9bn) was marginally below estimates. The company announced a buyback of INR 120bn at a tender offer price of INR 445 (~19% premium to CMP). This would result in c.5% reduction in shares o/s.

* Guidance and outlook: Wipro’s soft guidance (-3% to -1% CC QoQ for 1Q) belied strong deal wins in FY23. TCV of deals in 4Q was USD 4.1bn, second consecutive quarter of USD 4bn+ TCV (1.5x book-to-bill). Large deal TCV (USD 30mn+ deals) grew by 155% YoY to USD 1.03bn. While the guidance reflect discretionary spending cuts and longer transition period of recent deal wins, these deal wins bode well for growth beyond the next few quarters. Besides, we feel WPRO has already borne the impact of lower consulting related spending cuts. The growth should therefore improve even if the environment stays like this as large part of discretionary cut might be behind. A stable margin outlook is also positive in the current environment.

* Earnings largely unchanged; BUY stays: We have cut our FY24/25E USD revenue by 3.2%/3.9% and PAT by 6.7%/6.1%. But EPS is largely unchanged (down 1-2%) as lower equity base (due to buy-back) nullifies lower PAT. We maintain BUY with a revised TP of INR 450, valuing the company at 16x (from 18x). In an environment where current book of business is at risk, deal wins is the only quantitative metrics to gauge future growth prospect. WPRO appears best placed on that metric.

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