Wipro - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 459, Market Cap- Rs. 2,62,191 crore)

Wipro reported heathy set of Q3FY21 numbers and were above our estimates on all fronts. The company's IT services revenues increased 3.4% QoQ in Constant Currency (CC) terms above our estimate of 2.4% growth in CC terms. The growth in revenues was across verticals. The IT service EBIT margin increased 234 bps QoQ to 21.7% vs our estimate of 19.5%. On the overall basis the company's EBIT margin increased by 296 bps QoQ mainly led by higher profitability in India State Run Enterprise (ISRE) and IT product segment. Wipro guided that its Q4FY21E IT services revenues would be in the range of US$2,102 -2,143 million, which translates into 1.5%% to 3.5% QoQ growth.

Key highlights of the quarter were 1) The company has won 12 deals with > US$30Mn TCV and the TCV booked of these deals was over US$1.2Bn. 2) The company has declared dividend of Rs. 1/share. 3) The company's offshore % increased by 230 bps to 52.7% 4) The company's net utilisation decreased by 60 bps QoQ to 86.3% and attrition was flat QoQ at 11.0%. 3) The net addition of employees stood at 5065 5) In terms of verticals (in CC terms) BFSI grew by 1.2% QoQ, Manufacturing 4.0% QoQ, Communication 0.7% QoQ, Consumer Business Unit 5.2% QoQ, Energy vertical by 4.1% QoQ and Technology by 4.5% QoQ, respectively. Geographically the company's revenue growth was led by Americas and Europe which grew 2.3% QoQ and 8.6% QoQ.

Q3FY21 Earnings Summary

- In constant currency, global IT services revenues grew 3.4% sequentially, above our estimate of 2.4% growth. US$ revenues grew 3.9% QoQ to $2,071 million (vs. our estimate of US$2,050 million)

- Consolidated revenues grew by 3.7% QoQ to Rs. 15,670 crore. IT services revenues grew 3.8% sequentially to Rs. 15,333 crore while volatile IT products division declined by 8.2% QoQ to Rs. 155.2 crore

- IT services EBIT margin expanded 234 bps QoQ to 21.7% and was above our estimate of 19.5%. We believe the margin expansion was led by higher offshoring. On the overall basis the company's EBIT margin increased by 296 bps QoQ mainly led by higher profitability in India State Run Enterprise (ISRE) and IT product segment

- Reported PAT came in above our estimate at Rs. 2,967 crore (vs. our estimate of Rs. 2,583 crore) mainly due to lower than expected other income

- Wipro guided that its Q4FY21E IT services revenues would be in the range of US$2,102 -2,143 million, which translates into 1.5%% to 3.5% QoQ growth

- The company has declared a dividend of Rs. 1/share

Healthy quarter, improving margins and improving revenue trajectory prompt us to be positive on the stock. We would be revisiting our estimates and target price post the conference call.

Shares of WIPRO LTD. was last trading in BSE at Rs.458.75 as compared to the previous close of Rs. 457.7. The total number of shares traded during the day was 1546584 in over 27574 trades.

The stock hit an intraday high of Rs. 467.2 and intraday low of 453.1. The net turnover during the day was Rs. 712374184.

Source : Equity Bulls

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