Wipro (3QFY15) : Broad-based growth. Maintain BUY :: HDFC Securities

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Broad-based growth
Wipro’s 3QFY15 results were above our expectations
on top-line and PAT.
Revenue growth in constant currency for 3QFY15
stood at 3.7% QoQ, the strongest among peers.
TCS/Infosys reported ~2.5% constant currency
growth for 3QFY15. Wipro’s growth for 3QFY15 came
in at the upper end of its guidance (2-4%) adjusted
for cross currency headwinds. Company delivered a
broad-based growth for the quarter across verticals
and geographies which is a key positive. Driven by
steady deal wins, the IMS unit continued to show
acceleration in growth. IMS revenues grew by 4.5%
CQGR over the past six quarters and now accounts
for 27.3% of revenues. We believe the 3Q revenue
beat and moderate USD revenue growth guidance (1-
3% QoQ growth for 4Q), despite headwinds in the
Energy vertical, would be seen as a positive.
Valuations remain favorable (12.5x FY17E) and are at
a ~27% discount to TCS. Raise our TP by 3% to Rs
660/sh (15x FY17 EPS vs. 14.5x earlier). Retain BUY.
 3QFY15 Highlights : Total revenues at USD
1,795.3mn (up 1.3% QoQ in USD and 3.7% in constant
currency) were above our estimates (USD 1,790mn).
Wipro guided for 4QFY15 revenues of USD 1,814-
1,850mn, which implies a growth of 1.1-3% QoQ. IT
services’ EBIT margin came at 21.8%, down 20bps QoQ
and marginally below our estimates (22%). PAT at Rs
22bn was 4% above our estimates.
 View : Wipro’s mettle would be tested in its ability to
give a steady revenue growth guidance for 1QFY16.
The company has been witnessing a weak 1Q for the
past three years which was hindering overall revenue
growth for the year. High exposure to the Energy &
Utilities vertical (~16.4% of total revenues) as
compared to peers could also be a roadblock for strong
growth in FY16. Wipro’s ability to show sustainable
improvement in underperforming verticals
(Manufacturing, Retail, Transport) is the key for a
steady revival. We model USD revenue growth of
8/9.4/10% for FY15/FY16/FY17E. We retain our EPS
estimates as headwind to USD revenues owing to cross
currency woes is negated by tailwind from currency
reset (USD vs. INR) to lower levels. Maintain BUY

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010748