Please refer to important disclosures at the end of this report 1 ( ` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy) Net revenue 9,735 9,643 0.9 9,284 4.8 EBITDA 2,020 2,122 (4.8) 2,019 0.1 EBITDA margin (%) 20.8 22.0 (125)bp 21.7 (99)bp PAT 1,632 1,606 1.6 1,457 12.0 Source: Company, Angel Research For 1QFY2014, Wipro’s 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 our expectation of ~1.0% qoq growth; though in constant currencyterms revenues grew by 1.2%. Going forward, for 2QFY2014, the Management has given a USD revenue guidance of US$1,620mn-1,640mn, which translates into a qoq growth of 2-4%, which is above our expectation of 1.5-3.0% qoq growth. 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 recommend an Accumulate rating on the stock. Quarterly highlights: For 1QFY2014, Wipro’s consolidated revenues came in at `9,735cr, up 0.9% qoq. The company’s consolidated EBITDA margin declined by125bp qoq to 20.8% while the EBIT margin grew by 49bp qoq to 18.2%. The IT services segment’s EBIT margin was at 20.0%, down ~20bp qoq, impacted byone month wage hikes given to employees (effective 1 June 2013). The PAT came in line with our expectations at `1,632cr, up 1.6% qoq. Outlook and valuation: For 2QFY2014, the Management has given a USD revenue guidance of US$1,620mn-1,640mn, which translates into a qoq growth of 2-4%. The Management remains confident of the revenue growth pick-up sustaining, citing a pick-up in large deal closures and win rates, uptick in discretionary spending, a strong business pipeline and momentum in demand from the US sustaining. Though the deal pipeline has remained largelyunchanged over the past few months, deal closures and win ratios were on the up, reflecting both an improving environment (leading to faster decision-making) and execution (higher win ratios). We expect USD and INR revenue CAGR for IT services to be at 7.2% and 10.7%, respectively over FY2013-15. We expect an EBIT margin of 18.2% and 18.8% for FY2014 and FY2015, respectively. The stock is currently trading at 13.5x FY2014E and 12.3x FY2015E EPS. We value the stock at 14x FY2015E EPS of `31.2, which gives a target price of `435. We recommend Accumulate rating on the stock. Key financials (Consolidated, IFRS) Y/E March ( ` cr) FY2011 FY2012 FY2013 FY2014E FY2015E Net sales 31,099 37,525 37,823 42,196 45,890 % chg 14.7 20.7 0.8 11.6 8.8 Net profit 5,297 5,573 6,130 6,991 7,705 % chg 15.3 5.2 10.0 14.1 10.2 EBITDA margin (%) 21.2 19.8 21.7 21.0 21.6 EPS ( ` ) 21.7 22.7 24.8 28.3 31.2 P/E (x) 17.7 16.9 15.4 13.5 12.3 P/BV (x) 3.9 3.3 3.3 2.8 2.4 RoE (%) 22.0 19.5 21.5 20.7 19.4 RoCE (%) 15.5 14.7 15.9 15.3 15.1 EV/Sales (x) 2.7 2.2 2.1 1.8 1.5 EV/EBITDA (x) 12.9 11.4 9.6 8.4 6.8 Source: Company, Angel ResearchACCUMULATE CMP `383 Target Price `435 Investment Period 12 Months Stock Info Sector Net debt ( `cr) (9,965) Bloomberg Code Shareholding Pattern (%) Promoters 73.5 MF / Banks / Indian Fls 4.6 FII / NRIs / OCBs 7.3 Indian Public / Others 14.6 Abs. (%) 3m 1yr 3yr Sensex 2.4 18.7 9.6 Wipro 16.0 16.0 (7.3) Face Value ( `) BSE Sensex NiftyReuters Code 93,920 0.6 418/290 163,184 IT Avg. Daily Volume Market Cap ( `cr) Beta 52 Week High / Low 2 19,748 5,886 WIPR.BO WPRO@IN Ankita Somani +91 22-39357800 Ext: 6819 [email protected]Wipro Performance Highlights 1QFY2014 Result Update | IT July 29, 2013
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
The IT products segment reported a 14.3% yoy decline in its revenue to ` 817cr
during the quarter, as majority of business in this segment comes from India and
the Middle East regions which were soft during the quarter.
Exhibit 8: IT products – Revenue growth (yoy)
953
899
997
1,075
817(5.2)
(10.2)
10.8 14.7
(14.3)(15)
(5)
5
15
25
700
800
900
1,000
1,100
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14
( % )
( `
c r )
IT products yoy growth (%)
Source: Company, Angel Research
On a consolidated level, Wipro’s revenue came in at ` 9,735cr, up 0.9% qoq.
Hiring and utilization
Wipro reported a net addition of 1,469 employees in its IT services employee base,
which now stands at 147,281 headcounts. Voluntary attritions (annualized) in the
global IT business inched up to 13.0% in 1QFY2014 from 12.5% in 4QFY2012.
The utilization rate of the global IT business remained almost flat qoq at 64.7%,
which is at low levels for the company on an historical basis. The Management
indicated that this is because of the following factors: 1) hyper automation process
being implemented in the run services, resulting in higher productivity; 2) freshersadded into the system. Going ahead, increased utilization level will be an
Utilization – Global IT (%) 68.3 66.8 64.8 64.9 64.7 Attrition (%)
Global IT 15.2 14.4 12.9 12.5 13.0
BPO 13.4 14.4 12.5 12.8 12.3
Net additions 2,632 2,017 2,336 2,907 1,469
Source: Company, Angel Research
Margins mixed
During 1QFY2014, Wipro’s consolidated EBITDA margin declined by 125bp qoq
to 20.8% while EBIT margin grew by 49bp qoq to 18.2%, as there was a one-time
depreciation cost last quarter which was not present during 1QFY2014. The ITservices segment’s EBIT margin was at 20.0%, down ~20bp qoq, impacted by one
month wage hikes given to employees (effective June 1, 2013). The EBIT margin of
the IT products business segment declined by 90bp qoq to 1.6%, negatively
For 2QFY2014, the Management has given a USD revenue guidance of
US$1,620mn-1,640mn, which translates into a qoq growth of 2-4%, well above
our expectation of 1.5-3.0% qoq growth. The Management remains confident of
the revenue growth pick-up sustaining, citing a pick-up in large deal closures and
win rates, uptick in discretionary spending, strong business pipeline and
momentum in demand from US sustaining.
The Management indicated that CY2013 IT budgets are expected to remain stable
and anticipates a positive demand environment ahead. Though the deal pipeline
has remained largely unchanged over the past few months, deal closures and win
ratios were on the up, reflecting both an improving environment (leading to faster
decision-making) and execution (higher win ratios). The company sees itself better
placed than this time last year, to latch on to opportunities in the market. 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 expect Wipro’s volume growth to continue to lag from some of its peer companies
in the near term. Wipro has chosen a growth strategy of focusing on a selected few
segments in terms of industry verticals and services. We are modeling in an ~1.8%
revenue CQGR over 2Q-4QFY2014. We expect USD and INR revenue CAGR for
IT services to be at 7.2% and 10.7%, respectively over FY2013-15.
Wipro has been showing a decent performance in the past five quarters by
rationalizing costs. The Management has given wage hikes from June 1, 2013
(average of ~8.5% to offshore employees and ~3% to onsite employees), whichwill impact operating margins in 2QFY2014. We expect an EBIT margin of 18.2%
and 18.8% for FY2014 and FY2015, respectively. The stock is currently trading at
13.5x FY2014E and 12.3x FY2015E EPS. We value the stock at 14x FY2015E EPS
Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Angel Broking Pvt. Ltd., its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
document are those of the analyst, and the company may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Pvt. Ltd. or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .
Angel Broking Pvt. Ltd. has not independently verified all the information contained within this document. Accordingly, we cannottestify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Ltd. endeavours to update on a reasonable basis the information discussed in this material, there may beregulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Angel Broking Pvt. Ltd. and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or
other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in
the past.
Neither Angel Broking Pvt. Ltd., nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to thelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Ltd. and its affiliates may haveinvestment positions in the stocks recommended in this report.
Disclosure of Interest Statement Wipro
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors