Neutral Wipro Ltd For Target Rs.432 - Yes Securities
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Mixed operating performance; muted revenue guidance for Q4FY23
Result Synopsis
Wipro(WPRO) reported mixed financial performance for the quarter. The revenue growth was below expectation(cc growth of 0.6% QoQ), EBIT margin came in slightly above estimates. The sequential growth was led by Healthcare & Life Sciences vertical (up 5.5% QoQ) and Energy, Natural Resources & Utilities vertical (up 2.0% QoQ). The INR reported growth was supported by depreciation of INR by 2.9% QoQ vs USD. There was sequential improvement in EBIT margin(up 165bps QoQ) led by falling attrition, improving pyramid and INR depreciation.. The moderation in employee attrition continues as LTM attrition was down 180 bps QoQ to 21.2%
However, the clients remain cautious regarding the evolving macroeconomic situation especially in the US and Europe and consequently, we expect moderation in growth in near term. We estimate revenue CAGR of 11.7% over FY22?24E with average EBIT margin of 15.3%. We maintain our NEUTRAL rating on the stock with revised target price of Rs 432/share at 18.0x on FY24E EPS. The stock trades at PER of 18.9x/16.5x on FY23E/FY24E EPS.
Result Highlights
* Wipro reported revenue of Rs 232.3bn, (up 3.1% QoQ in INR terms, up 0.2% QoQ in USD terms for IT services). The cc growth was 0.6% QoQ. The growth was led by Healthcare & Life Sciences vertical (up 5.5% QoQ) and Energy, Natural Resources & Utilities vertical (up 2.0% QoQ).
* EBIT margin improved by 165 bps QoQ to 15.6%, led by decrease in cost of revenues (down 1.2% QoQ). EBIT margin was also supported by falling attrition, improving pyramid and INR depreciation.
* Order bookings remained strong as it grew by 26.0% YoY to $4.3bn and large deal bookings grew by 69% YoY.
* Net employee addition was (435) employees for the quarter to a close of 258,444 employees. LTM attrition decreased by 180 bps QoQ to 21.2%. Net utilization (excluding trainees) was down 10 bps QoQ to 79.7%.
* Total number of active clients increased by 13 clients QoQ to 1484 active clients. Offshore revenue mix grew by 10 bps QoQ to 59.0%
* Has guided -0.6% to 1.0% QoQ revenue growth in cc terms for Q4FY23. (11.5- 12% for FY23 in cc terms)
* Declared interim dividend of Rs. 1 per share; payment date: 10th February 2023.
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