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WIPRO LIMITED
Mar-12 results: weakening outlook
Wipro guided for revenue growth in the range of -1% to +0.9% q/q for the Jun-12
quarter, indicating that the near-term outlook remains challenging for Indian IT
companies. Although results for the Mar-12 quarter were in line with our estimates,
the tough macro environment could make it difficult for Wipro to resolve its
execution issues. Valuations with a P/E of 15.7x FY13 (Infosys trades at 14.4x) also
do not appear inexpensive. Hence, we maintain our 3-Underweight rating and our
12-month price target of Rs360.
Mar-12 performance: Wipro’s IT services revenue of US$1,536mn (+2% q/q) was in
line with our estimate. This was driven by volume growth, which stood at +0.8% and
price realization improvement of +0.6% q/q. The growth was driven by energy/utilities
(+6.8% q/q) and retail (+5.9% q/q) while telecom and BFSI saw sequential declines of
2.1% and 0.6%, respectively. By geography, APAC and emerging markets (+10.5% q/q)
were the main growth drivers while the US and Europe showed muted growth.
Jun-12 guidance: Wipro guided for IT services revenue of US$1,520-1,550m (-1% to
0.9% q/q), indicating that the outlook remains unpredictable for IT companies. Out of
the three Offshore IT service companies that provide quarterly guidance, Wipro is now
the second company (after Infosys) to warn of a slow June quarter. Clearly all eyes will
now be on CTSH results on 7 May. Wipro's margins could also remain under pressure in
the June quarter due to higher wages.
Sustained improvement appears warranted to justify valuations: We adjust our EPS
estimates down 3.5% for FY13 and down 4.1% for FY14 to incorporate the weak
outlook. The stock’s current valuations seem unjustified given the volatile macro
environment and the execution risks associated with the company. We maintain our
12-month price target of Rs360 and our 3-Underweight rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
WIPRO LIMITED
Mar-12 results: weakening outlook
Wipro guided for revenue growth in the range of -1% to +0.9% q/q for the Jun-12
quarter, indicating that the near-term outlook remains challenging for Indian IT
companies. Although results for the Mar-12 quarter were in line with our estimates,
the tough macro environment could make it difficult for Wipro to resolve its
execution issues. Valuations with a P/E of 15.7x FY13 (Infosys trades at 14.4x) also
do not appear inexpensive. Hence, we maintain our 3-Underweight rating and our
12-month price target of Rs360.
Mar-12 performance: Wipro’s IT services revenue of US$1,536mn (+2% q/q) was in
line with our estimate. This was driven by volume growth, which stood at +0.8% and
price realization improvement of +0.6% q/q. The growth was driven by energy/utilities
(+6.8% q/q) and retail (+5.9% q/q) while telecom and BFSI saw sequential declines of
2.1% and 0.6%, respectively. By geography, APAC and emerging markets (+10.5% q/q)
were the main growth drivers while the US and Europe showed muted growth.
Jun-12 guidance: Wipro guided for IT services revenue of US$1,520-1,550m (-1% to
0.9% q/q), indicating that the outlook remains unpredictable for IT companies. Out of
the three Offshore IT service companies that provide quarterly guidance, Wipro is now
the second company (after Infosys) to warn of a slow June quarter. Clearly all eyes will
now be on CTSH results on 7 May. Wipro's margins could also remain under pressure in
the June quarter due to higher wages.
Sustained improvement appears warranted to justify valuations: We adjust our EPS
estimates down 3.5% for FY13 and down 4.1% for FY14 to incorporate the weak
outlook. The stock’s current valuations seem unjustified given the volatile macro
environment and the execution risks associated with the company. We maintain our
12-month price target of Rs360 and our 3-Underweight rating.
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