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Views on Wipro Limited 3QFY2018: Angel Broking

Posted On: 2018-01-28 10:01:06

Views of Ms. Sarabjit Kour Nangra (VP Research- IT, Angel Broking):

"Wipro posted numbers in line with expectations on the EBIT front, while sales and net profit came below expectations. Company's IT services posted a flat QoQ growth in USD revenues to US$2,014mn V/s US$2,035mn expectations V/s US$2,013mn in 2QFY2018. On Constant Currency (CC) terms, the company posted a 0.9% QoQ growth. In rupee terms consolidated revenues came in at INR 13,669cr V/s INR 13,450cr expectations V/s INR 13,423cr in 2QFY2018, up 1.8% QoQ. The growth in terms of geography the growth was mainly driven by Europe (4.7% QoQ CC growth), India & Middle East (1.4% QoQ CC growth) business. In terms of verticals, the growth was driven by the BFSI (4.4% QoQ CC growth) and Healthcare (2.5% QoQ CC growth) segments. The key vertical of the company Energy, Natural Resources and Utilities (6.1% QoQ Cc de-growth). Manufacturing and Technology, posted a flat CC QoQ growth during the period. Digital revenue surpassed 25% of its IT Services business.

On EBIT front, the company posted an EBIT of 16.8% V/s 16.8% in 2QFY2018; in line with expectations. Consequently, the Adj. PAT came in at INR 2,255cr V/s INR 2,147cr expected V/s INR 2,191cr in 2QFY2018, growth of 2.9% QoQ. During the quarter, company reported an impact of INR 317.5cr, made with respect to insolvency of a customer post the balance sheet date. Thus reported PAT came in INR 1,937cr, registering a QoQ dip of 11.6%.

On, the operational front the company had utilization levels of 71.0% V/s 72.9% in 2QFY2018. The attrition rate during the quarter was 15.9% V/s 15.7% in 2QFY2018. In terms of client addition, the company added 79 clients. It added one client in the US$75mn+, 2 in the US$50mn. For 4QFY2018, the company has given guidance of US$2,033-US$2,073mn, a CC QoQ growth of 1-3%.

Overall, the current quarter numbers were below expectations. Going forward into the next quarter, the company is given a guidance, which is higher and is in line with its earlier commentary that they expect a gradual improvement form 4QFY2018. The client additions have been healthy, with good additions in the high sales ticket sizes also. While Wipro has been improving its operating performance, its top line growth has been muted. Thus as we move into FY2019, for Wipro it's imperative it grows its sales, along with improving its operating leverage. As of now, on back of the valuations, we maintain our REDUCE rating on the stock, with a price target of INR 289."

Shares of WIPRO LTD. was last trading in BSE at Rs.311.95 as compared to the previous close of Rs. 313.75. The total number of shares traded during the day was 325966 in over 2124 trades.

The stock hit an intraday high of Rs. 317.3 and intraday low of 309. The net turnover during the day was Rs. 101742595.


Source: Equity Bulls

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