Wipro - 1QFY2014 Result Review - Angel Broking

For 1QFY2014, Wipro results were broadly in-line with our estimates except in terms of USD revenue. The IT services revenue came in at US$1,588mn, up just 0.2% qoq vs. expectation of ~1.0% qoq growth; though in constant currency terms revenues grew by 1.2%. At the consolidated level, Wipro's revenue came in at Rs. 9735cr, down 11.7% qoq due to hiving off of non-IT business. During 1QFY2014, Wipro's consolidated EBITDA margin grew by 32bp qoq to 20.8% while EBITDA margin of IT services segment declined by ~40bp qoq as gains due to currency was offset by negative impact of wage hikes given from 1 June 2013. PAT came in in-line with expectations at Rs. 1,632, down 6.1% qoq while on a liketo-like basis (not including non-IT business) PAT was up ~3% on a sequential basis. The company has added 1,469 people in the quarter taking the total headcount to ~1,47,280. It added 28 new customers, the lowest addition in the past five quarters.

The management has made several changes to the structure to align it more with the demand generation process and increasing efficiency. For 2QFY2014, the management has given a USD revenue guidance of US$1,620mn-1,650mn, which translates into a qoq growth of 2-4% which is above our expectations of 1.5-3% and is better than guidance given by company since past several quarters. This guidance indicates initial signs of stability in the company going ahead. Management indicted about pickup in large deal closures and robust order book which bodes well for growth in coming quarters. We believe that the restructuring initiatives have not yet started showing the expected results and will start reflecting in the financials of the company in due course. We remain positive on the stock; however we would revise our target price and rating post the earnings conference call.

Source : Equity Bulls

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