Wipro - 4QFY2013 Result Update - Angel Broking

Wipro came out with a lower-than-expected set of results for 4QFY2013; the results are lower on the revenue as well the margin front. The IT services' USD revenue growth came in at just 0.5% qoq. The only positive in the results was the 2.5% qoq volume growth in IT services. Going forward, for 1QFY2014, the Management has given a USD revenue guidance of US$1,575mn-1,610mn, which translates into a qoq growth of -0.6 to +1.6%, which is well below our expectation of +1.5-3.5% qoq growth. The Management has factored in the continued uncertainty in ramp up of discretionary projects. We recommend an Accumulate rating on the stock.

Quarterly highlights: For 4QFY2013, Wipro's consolidated revenues came in at Rs. 11,026cr, almost flat qoq. The consolidated EBITDA margin increased by 31bp qoq to 20.4%, while its EBIT margin declined by 98bp qoq to 16.7%. The overall reported EBIT margin of the business, excluding demerged entities, stood at 17.8%, in line with estimates. The EBIT margin for IT services stood at 20.2%, down ~60bp qoq. The PAT came in-line with expectations at Rs. 1,737cr, up 0.7% qoq, aided by Rs. 328cr of other income.

Outlook and valuation: The Management has given a USD revenue guidance of US$1,575mn-1,610mn for 1QFY2014, which translates into a qoq growth of -0.6 to +1.6%. The soft guidance is on account of 1Q tending to be a seasonally weak quarter for India and the Middle East geographies, which have been the growth drivers in 4QFY2013. Additionally, revenues around discretionary segments remain uncertain. The company however expects the growth rates to improve going into 2QFY2014 and 3QFY2014. The Management indicated that the pipeline for the company as on March 2013 appears similar to that as in March 2012; however, the company sees itself better placed than around this time last year, to latch on to the opportunities in the market. We expect USD and INR revenue CAGR for IT services to be at 7.6% and 7.2%, respectively over FY2013-15. We value the stock at 13.5x FY2015E EPS of Rs. 28.5, which gives us a target price of Rs. 385. We recommend Accumulate rating on the stock.

Source : Equity Bulls

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