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Wipro Ltd. (WIPR.BO)
Neutral Equity Research
Below expectations: CEOs exit, muted volumes pose NT pressure
What surprised us
Wipro posted 3QFY11 revenue of Rs78.3bn (up 1.3% qoq, 3% below our
estimates) and net income of Rs13.2bn. The revenue miss was due to
weaker volume (+1.5% qoq) and IT product revenue growth (-18% qoq)
although this was offset by 2.9% qoq improvement in blended pricing. IT
services margin remained flat (at 22.2%) due to higher G&A and a drop in
utilization by 230bp qoq (at 68.6%, lowest in 8 quarters). Hiring picked up to
2.4k net adds; attrition remained high at 21.7% quarterly annualized (down
180bp qoq). Energy & Utilities was the fastest growing vertical (+11.1% qoq).
Europe continued to grow strongly (+11.5% qoq), similar to industry trend.
Wipro guided for IT services qoq revenue growth of 3%-5% in 4QFY11.
Top management changes could make things fluid in NT: Mr. Girish
Paranjpe and Mr. Suresh Vaswani, joint CEOs of IT business, have stepped
down w.e.f. Feb. 1, 2011. Mr. T.K. Kurien, current head of clean-tech division,
has been appointed as the new CEO. He has 23+ years’ experience with
more than 10 years in Wipro in its telecom, healthcare, and BPO divisions.
What to do with the stock
We maintain our Neutral rating and 12-m Director's Cut-based TP of Rs512.
We reiterate that Wipro may lag its large cap peers in revenue/EPS growth
(19%/15%) over FY10-FY13E (vs. 24%/21% for INFY/TCS) on lower exposure
to key growth opportunities like BFSI. Among the large-caps, we continue to
prefer INFY and HCL Tech (both Buys). We fine-tune our FY11E-FY13E EPS.
Risks: Faster economic recovery (upside); currency volatility (downside).
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Wipro Ltd. (WIPR.BO)
Neutral Equity Research
Below expectations: CEOs exit, muted volumes pose NT pressure
What surprised us
Wipro posted 3QFY11 revenue of Rs78.3bn (up 1.3% qoq, 3% below our
estimates) and net income of Rs13.2bn. The revenue miss was due to
weaker volume (+1.5% qoq) and IT product revenue growth (-18% qoq)
although this was offset by 2.9% qoq improvement in blended pricing. IT
services margin remained flat (at 22.2%) due to higher G&A and a drop in
utilization by 230bp qoq (at 68.6%, lowest in 8 quarters). Hiring picked up to
2.4k net adds; attrition remained high at 21.7% quarterly annualized (down
180bp qoq). Energy & Utilities was the fastest growing vertical (+11.1% qoq).
Europe continued to grow strongly (+11.5% qoq), similar to industry trend.
Wipro guided for IT services qoq revenue growth of 3%-5% in 4QFY11.
Top management changes could make things fluid in NT: Mr. Girish
Paranjpe and Mr. Suresh Vaswani, joint CEOs of IT business, have stepped
down w.e.f. Feb. 1, 2011. Mr. T.K. Kurien, current head of clean-tech division,
has been appointed as the new CEO. He has 23+ years’ experience with
more than 10 years in Wipro in its telecom, healthcare, and BPO divisions.
What to do with the stock
We maintain our Neutral rating and 12-m Director's Cut-based TP of Rs512.
We reiterate that Wipro may lag its large cap peers in revenue/EPS growth
(19%/15%) over FY10-FY13E (vs. 24%/21% for INFY/TCS) on lower exposure
to key growth opportunities like BFSI. Among the large-caps, we continue to
prefer INFY and HCL Tech (both Buys). We fine-tune our FY11E-FY13E EPS.
Risks: Faster economic recovery (upside); currency volatility (downside).
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