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Wipro Ltd.
Meeting takeaways: Mgmt
working with Dec-11 timeline
for turnaround triggers
Quick Comment: We expect Wipro to report organic
revenues inline with its revenue guidance for 1QFY12 of
US$1,394mn-US$1,422mn (-0.4% qoq to +1.4% qoq)
with additional US$8-10m contribution from SAIC. We
believe its Sep-11 quarter (Q2) revenue guidance will be
better than Q1 but unlikely to be exciting and any
surprise in revenue growth will have to wait till Dec-11.
What's new: Wipro management sounded confident
that FY12e revenues could grow faster than 16-18%
(industry growth estimate as per NASSCOM) and
believes that growth is likely to be back ended for FY12e.
Based on 1Q revenue guidance, 4-6% qoq US$ revenue
growth over 2Q-4Q would lead to a 16-19% yoy FY12e
revenue growth, in our view.
Wipro sounded positive on external clients
spending environment (uptick in discretionary projects
and improved pricing). Its vertical outlook is similar to
TCS and it expects BFSI, retail, energy and healthcare
verticals to drive growth in FY12. Telecom could
continue to lag. Currently, Infrastructure management
services projects from ~25-30% of the order pipeline.
Focus on mining key accounts: The average size of
Wipro’s top 10 clients is ~US$100m compared with
Infosys’ US$160m and TCS’ US$240m. Wipro will
continue to focus on mining its top 20 accounts and
improve sales productivity going forward. In FY11, its
top 10 clients grew 17% yoy - below company average.
Maintain EW: We believe that unless revenue growth at
Wipro accelerates to match that of the other large
companies in the sector, the stock will likely continue to
trade around its current discount levels.
Other meeting highlights:
1) Wipro mgmt has changed its order pipeline review process.
It has now started reviewing the pipeline for the next two
quarters vs. 1-quarter earlier. We believe this should help
improve the visibility on effectiveness of recent organizational
changes for the management.
2) Package implementation and infrastructure services are
leading growth: Wipro expects package revenues to continue
to grow faster than the company average in FY12e. Package
revenues have better than company average margins.
3) Wipro added 14k employees (net). Out of the total hires in
FY11, freshers from campus were 45% and laterals 55%. For
FY12e, management expects campus hires to form 60-70% of
the total hiring plan and laterals ~30-40%.
Company Description
Wipro Ltd provides high-end R&D services along with
application development and maintenance services to corporate
giants and global technology organizations. The company also
manages IT infrastructure for both types of customers globally.
Wipro's solutions cover a wide range of business areas including
hardware design, system software and embedded software,
telecom software, e-commerce consulting, web enabling and
customer management.
India Software
Industry View: In-Line
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Wipro Ltd.
Meeting takeaways: Mgmt
working with Dec-11 timeline
for turnaround triggers
Quick Comment: We expect Wipro to report organic
revenues inline with its revenue guidance for 1QFY12 of
US$1,394mn-US$1,422mn (-0.4% qoq to +1.4% qoq)
with additional US$8-10m contribution from SAIC. We
believe its Sep-11 quarter (Q2) revenue guidance will be
better than Q1 but unlikely to be exciting and any
surprise in revenue growth will have to wait till Dec-11.
What's new: Wipro management sounded confident
that FY12e revenues could grow faster than 16-18%
(industry growth estimate as per NASSCOM) and
believes that growth is likely to be back ended for FY12e.
Based on 1Q revenue guidance, 4-6% qoq US$ revenue
growth over 2Q-4Q would lead to a 16-19% yoy FY12e
revenue growth, in our view.
Wipro sounded positive on external clients
spending environment (uptick in discretionary projects
and improved pricing). Its vertical outlook is similar to
TCS and it expects BFSI, retail, energy and healthcare
verticals to drive growth in FY12. Telecom could
continue to lag. Currently, Infrastructure management
services projects from ~25-30% of the order pipeline.
Focus on mining key accounts: The average size of
Wipro’s top 10 clients is ~US$100m compared with
Infosys’ US$160m and TCS’ US$240m. Wipro will
continue to focus on mining its top 20 accounts and
improve sales productivity going forward. In FY11, its
top 10 clients grew 17% yoy - below company average.
Maintain EW: We believe that unless revenue growth at
Wipro accelerates to match that of the other large
companies in the sector, the stock will likely continue to
trade around its current discount levels.
Other meeting highlights:
1) Wipro mgmt has changed its order pipeline review process.
It has now started reviewing the pipeline for the next two
quarters vs. 1-quarter earlier. We believe this should help
improve the visibility on effectiveness of recent organizational
changes for the management.
2) Package implementation and infrastructure services are
leading growth: Wipro expects package revenues to continue
to grow faster than the company average in FY12e. Package
revenues have better than company average margins.
3) Wipro added 14k employees (net). Out of the total hires in
FY11, freshers from campus were 45% and laterals 55%. For
FY12e, management expects campus hires to form 60-70% of
the total hiring plan and laterals ~30-40%.
Company Description
Wipro Ltd provides high-end R&D services along with
application development and maintenance services to corporate
giants and global technology organizations. The company also
manages IT infrastructure for both types of customers globally.
Wipro's solutions cover a wide range of business areas including
hardware design, system software and embedded software,
telecom software, e-commerce consulting, web enabling and
customer management.
India Software
Industry View: In-Line
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