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UBS Investment Research
First Read: Wipro
O rganic revenue growth remains weak
IT services revenue disappoints, margins beat eatimates
Wipro reported IT services revenue of US$1408m, flat QoQ and lower than our
estimate of US$1436mn. However, margins remained flat QoQ despite 1-month
impact of wage hikes due to better employee utilisation and lower G&A expenses.
Consolidated revenue at Rs84.9bn was 1.7% above our estimates due to higher
revenue from the India business. Consolidated net profit at Rs13.3bn was 4.5%
above due to higher forex gains.
2Q guidance of 2-4% implies weak organic revenue growth
Wipro has guided for IT services revenue of $1436-1464mn, implying 2-4% QoQ
growth, vs. our estimate of 3-4% QoQ. We believe this guidance includes the full
quarter impact of SAIC acquisition, which had revenue of US$188mn on a LTM
basis. Excluding SAIC impact, the guidance is weak at -1% to +1%, in line with
the organic revenue guidance in 1Q.
Meeting industry average growth rates will be a tough task in FY12
Wipro will need a CQGR of 5.8-8% in 2H FY12 in order to meet NASSCOM’s
predictions on industry average revenue growth on 16-18% in FY12. Given the
weak momentum seen in 1H, we think it likely that Wipro could grow slower than
industry average in FY12, below our current 19% YoY growth estimate.
Valuation: maintain Sell
We expect Wipro’s stock to remain under pressure as the slower growth
expectations for FY12 are factored into consensus. We are reviewing estimates.
Our PT is based on DCF.
Wipro Ltd.
Wipro is the third largest IT services company in India with IT services
revenues of US$4.4bn and around 110,000 employees in FY10. Its main
verticals are telecoms, media and technology (26% of revenues), financial
services (26% of revenues), and manufacturing (15% of revenues). Wipro has a
diversified service offering in applications development and maintenance,
testing, package implementation, infrastructure services, and BPO. Wipro
derives 58% revenue from the US, 26% from Europe, and the rest from India
and other emerging markets.
Statement of Risk
A sharp decline in IT Services spending could result in downward revision of
our earnings estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
First Read: Wipro
O rganic revenue growth remains weak
IT services revenue disappoints, margins beat eatimates
Wipro reported IT services revenue of US$1408m, flat QoQ and lower than our
estimate of US$1436mn. However, margins remained flat QoQ despite 1-month
impact of wage hikes due to better employee utilisation and lower G&A expenses.
Consolidated revenue at Rs84.9bn was 1.7% above our estimates due to higher
revenue from the India business. Consolidated net profit at Rs13.3bn was 4.5%
above due to higher forex gains.
2Q guidance of 2-4% implies weak organic revenue growth
Wipro has guided for IT services revenue of $1436-1464mn, implying 2-4% QoQ
growth, vs. our estimate of 3-4% QoQ. We believe this guidance includes the full
quarter impact of SAIC acquisition, which had revenue of US$188mn on a LTM
basis. Excluding SAIC impact, the guidance is weak at -1% to +1%, in line with
the organic revenue guidance in 1Q.
Meeting industry average growth rates will be a tough task in FY12
Wipro will need a CQGR of 5.8-8% in 2H FY12 in order to meet NASSCOM’s
predictions on industry average revenue growth on 16-18% in FY12. Given the
weak momentum seen in 1H, we think it likely that Wipro could grow slower than
industry average in FY12, below our current 19% YoY growth estimate.
Valuation: maintain Sell
We expect Wipro’s stock to remain under pressure as the slower growth
expectations for FY12 are factored into consensus. We are reviewing estimates.
Our PT is based on DCF.
Wipro Ltd.
Wipro is the third largest IT services company in India with IT services
revenues of US$4.4bn and around 110,000 employees in FY10. Its main
verticals are telecoms, media and technology (26% of revenues), financial
services (26% of revenues), and manufacturing (15% of revenues). Wipro has a
diversified service offering in applications development and maintenance,
testing, package implementation, infrastructure services, and BPO. Wipro
derives 58% revenue from the US, 26% from Europe, and the rest from India
and other emerging markets.
Statement of Risk
A sharp decline in IT Services spending could result in downward revision of
our earnings estimates.
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