Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Wipro's 1Q12 results were lower than expectations despite muted growth guidance. Weak
organic guidance for 2Q12 indicates that benefits of restructuring are not likely to come
earlier than anticipated. We downgrade FY12/FY13F EPS by 6% and retain Hold with a
revised TP of Rs438.
Weak guidance for 2Q12 is a key negative surprise
On the low base of 1.7% qoq growth in IT services volumes (ex BPO, Infocrossing and
India/Middle East) from 3Q11-1Q12, Wipro’s organic USD growth guidance of almost flat-
1.9% growth in IT services for 2Q12 is lower than our expectation. In addition to the IT
services EBIT margin (ex forex) decline of 70bp qoq in 1Q12, muted volume growth, wage
inflation, full quarter consolidation of the SAIC unit and any adverse forex should lead to a
higher decline in margins in 2Q12. Despite the likely growth bounce back in 2H12, Wipro’s
FY12F IT services organic revenue growth rates should continue lagging peers by low- to
mid-double digits (vs 7-10% growth lag in FY11). We cut FY12/13F EPS by 6% to factor in
lower-than-expected revenues in 1Q12 and weak 2Q12 guidance. Considering the recent
stock price weakness, any further substantial decline could lead to a buying opportunity.
Growth challenges are not fully behind
Despite Wipro’s ongoing organisational restructuring being a right step over the medium to long
term to address the growth lag versus peers, we believe that challenges to outperform peer
growth rates are steep. In three of the four momentum verticals of Wipro (excluding
Energy/Utility), competitive challenges are high considering improved positioning and increasing
wallet share of peers. Even in 1Q12, despite 16.9% yoy growth in IT services revenues, growth
within key markets of the US was just 8.1% vs Infosys and TCS registering 17 and 27% growth.
Wipro’s two large deal wins within BFSI for combined TCV of US$500m is impressive. However,
we would like to see consistency in this trend going forward.
1Q12 results lower than our expectations
Wipro posted 0.5% growth in IT services USD revenues (RBS 1.1%) with an organic revenue
decline of 0.2% qoq. IT services EBIT margins at 22% (RBSe 21.5%) were higher due to forex
hedge gains (ex the same margins down 70bp qoq). Recurring PAT at Rs13.12bn (RBSe
Rs13.66bn) was lower due to higher forex loss (below EBIT) and tax provisions.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Wipro's 1Q12 results were lower than expectations despite muted growth guidance. Weak
organic guidance for 2Q12 indicates that benefits of restructuring are not likely to come
earlier than anticipated. We downgrade FY12/FY13F EPS by 6% and retain Hold with a
revised TP of Rs438.
Weak guidance for 2Q12 is a key negative surprise
On the low base of 1.7% qoq growth in IT services volumes (ex BPO, Infocrossing and
India/Middle East) from 3Q11-1Q12, Wipro’s organic USD growth guidance of almost flat-
1.9% growth in IT services for 2Q12 is lower than our expectation. In addition to the IT
services EBIT margin (ex forex) decline of 70bp qoq in 1Q12, muted volume growth, wage
inflation, full quarter consolidation of the SAIC unit and any adverse forex should lead to a
higher decline in margins in 2Q12. Despite the likely growth bounce back in 2H12, Wipro’s
FY12F IT services organic revenue growth rates should continue lagging peers by low- to
mid-double digits (vs 7-10% growth lag in FY11). We cut FY12/13F EPS by 6% to factor in
lower-than-expected revenues in 1Q12 and weak 2Q12 guidance. Considering the recent
stock price weakness, any further substantial decline could lead to a buying opportunity.
Growth challenges are not fully behind
Despite Wipro’s ongoing organisational restructuring being a right step over the medium to long
term to address the growth lag versus peers, we believe that challenges to outperform peer
growth rates are steep. In three of the four momentum verticals of Wipro (excluding
Energy/Utility), competitive challenges are high considering improved positioning and increasing
wallet share of peers. Even in 1Q12, despite 16.9% yoy growth in IT services revenues, growth
within key markets of the US was just 8.1% vs Infosys and TCS registering 17 and 27% growth.
Wipro’s two large deal wins within BFSI for combined TCV of US$500m is impressive. However,
we would like to see consistency in this trend going forward.
1Q12 results lower than our expectations
Wipro posted 0.5% growth in IT services USD revenues (RBS 1.1%) with an organic revenue
decline of 0.2% qoq. IT services EBIT margins at 22% (RBSe 21.5%) were higher due to forex
hedge gains (ex the same margins down 70bp qoq). Recurring PAT at Rs13.12bn (RBSe
Rs13.66bn) was lower due to higher forex loss (below EBIT) and tax provisions.
No comments:
Post a Comment