Research

Wipro - Q2FY13 Result Preview - Way2Wealth

Posted On : 2012-10-12 23:45:22( TIMEZONE : IST )

How The Quarter Looks Like?

Revenue Growth Expected To Lag Peers

Wipro's revenue from IT services is expected to register 1.99% growth sequentially to $1545mn. Growth would be lower as delay in decision making, setback in project ramp up and huge uncertainty into the systems affected the volume growth. The company is expected to give a growth guidance 1.5% - 2% for quarter-3. Moreover, deal flow commentary and deal wins would also be very important to understand the future growth prospect of Wipro.

Margin To Remain Under Pressure

Margin performance is expected to remain under pressure due to wage hike impact and higher S&M investment for client mining activity. We believe, operating margin would reach 16.30% in Q2FY13 against 17.86% in the previous quarter. Management's margin outlook in the appreciating INR scenario is a key thing to watch out.

Decision Delay Continues; Sporadic Pricing Pressure Exist

Wipro management is not much concerned about overall demand scenario, but, delay in decision making and low conversion rate is hurting the overall growth. The company is also experiencing pressure on pricing in the weaker segment, like investment banking and capital market. But, overall pricing environment is not worrisome to the management.

BFS Remain Under Pressure; Insurance Good Pipeline

Wipro is also experiencing pressure on BFS segment mainly due to low volume traction in the investment banking and capital market space. But, retail banking and insurance is expected to continue with their growth momentum on the basis of relatively stronger deal pipeline.

Workforce Alignment Complete; Capability Alignment Continues

The management indicated restructuring process as work in progress. The organizational alignment is completely done. However, aligning capabilities is nearly 50% done, whereas, filling the differentiation gap is only 30% complete. Nevertheless, the early taste of success of restructuring is already felt by the company in the form of improved customer satisfaction, increased employee satisfaction and better gross margin for the projects.