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Wipro - 1QFY2013 Result Update - Angel Broking
Posted On : 2012-07-26 10:58:01( TIMEZONE : IST )
For 1QFY2013, Wipro's IT services USD revenue growth came in lower than expected while, in rupee terms, overall results met expectations. One key negative thing was tepid volume growth of 0.8% qoq (way below other peer companies), but on the positive side the company has been able to maintain its pricing as against peer companies which reported modest decline in overall pricing. For 2QFY2013, management has given USD revenue guidance of US$1,520mn-1,550mn, which translates into qoq growth of 0.3-2.3%, lower than our expectation of 1.5-3.5%. We maintain Buy rating on the stock.
Quarterly highlights: For 1QFY2013, Wipro registered a 7.9% qoq growth in its revenue to Rs.10,653cr. Revenue from the IT services segment came in at US$1,515mn, down 1.4% qoq. Wipro's EBITDA margin inch up slightly by 24bp to 20.1%, despite ~300bp qoq benefits derived from INR depreciation against USD, because of substantial rise in S&M investments by ~23% qoq.
Outlook and valuation: For 2QFY2013, management has given USD revenue guidance of US$1,520mn-1,550mn, which translates into qoq growth of 0.3-2.3%, (lower than our expectation of 1.5-3.5%) because of continued weakness in IT spend from investment banks and India region. With sluggish revenue growth in 1QFY2013 and lackluster 2QFY2013 guidance, for Wipro to achieve Nasscom's industry guidance of FY2013 USD revenue growth (11-14%), seems unattainable. We expect Wipro's transition will take longer than anticipated earlier and the uncertain macro environment will further push the timeline. We expect USD and INR revenue CAGR for IT services to be at 8.8% and 13.2%, respectively over FY2012-14E. At the operating front, Wipro has tailwinds of improving utilization level and headwinds such as wage inflation and moderate volume growth, which are expected to pull down its margins to some extent. We expect a 12.2% and 11.1% CAGR in EBITDA and PAT over FY2012-14E. We value the stock at 15x FY2014E EPS of Rs.28.0, which gives us a target price of Rs.420. We maintain Buy rating on the stock.
