Buy Wipro Ltd for Target Rs.505 - Yes Securities Ltd
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Inline operating performance; muted revenue guidance for Q4FY24
Result Synopsis
Wipro (WPRO) reported broadly inline financial performance for the quarter. The revenue growth was inline with expectation and EBIT margin slightly above expectation. The sequential growth was (1.5%) QoQ in USD terms, led by Healthcare vertical (up 7.8% QoQ). Revenue declined by 1.7% QoQ in cc terms. There was sequential improvement in EBIT margin (up 1bps QoQ) led by operating efficiency. The moderation in employee attrition continues as LTM attrition was down 130 bps QoQ to 14.2%.
The near term demand environment remains challenging as the clients remain cautious regarding the evolving macroeconomic situation especially in the US and Europe; and consequently, we expect muted revenue performance in near term. We estimate revenue CAGR of 6.6% over FY23?26E with average EBIT margin of 15.2% over the period. We maintain our NEUTRAL rating on the stock with revised target price of Rs 505/share at 19.5x on FY26E EPS. The stock trades at PER of 20.2x/17.9x on FY25E/FY26E EPS.
Result Highlights
* Wipro reported revenue of Rs 222.1bn, (down 1.4% QoQ in INR terms, down 1.5% QoQ in USD terms for IT services). Revenue declined by 1.7% QoQ in cc terms. The sequential performance was led by Healthcare & Life Science vertical (up 7.8% QoQ).
* EBIT margin remained flat QoQ at 14.7%.
* Order bookings remained strong $3.8bn (vs $3.8bn in Q2FY24) and large deal bookings were $0.9bn (down 8.3% YoY in cc terms).
* Net employee addition was (4,473) employees for the quarter to a close of 240,234 employees. LTM attrition decreased by 130 bps QoQ to 14.2%. Net utilization (excluding trainees) was down 50 bps QoQ to 84.0%.
* Total number of active clients decreased by 44 clients QoQ to 1349 active clients. Offshore revenue mix decreased by 10 bps QoQ to 59.8%.
* Has guided -1.5% to 0.5% QoQ revenue growth in cc terms for Q4FY24.
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