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D e l i v e r s o n w e a k e x p e c t a t i o n s
Wipro reported its Q3FY12 numbers above our/consensus’ moderated
expectations. IT services revenues grew 11.4% to | 7,608 crore and were
above our | 7,461 crore estimate. Despite SAIC’s integration, US$
revenues grew 2.2% QoQ to $1.505 billion vs. our $1.507 billion estimate
and came in at the lower end of the guided range of 2-4% QoQ growth.
Even constant currency growth of 4.5% was in-line with TCS (4.5%) and
Infosys (4.4%) while volume growth of 1.8% was way below our 3.2%
estimate. Though the Q4 revenue guidance of 0-2% QoQ growth appears
better than Infosys (0%), we highlight that excluding SAIC’s revenue
contribution of $40 million (quarterly run-rate), organic Q4 QoQ growth
guidance could have been -1.7 to 0.3%. Our belief of misleading organic
growth stays and continues to influence our HOLD rating.
ƒ Result analysis
Consolidated revenues grew 9.9% QoQ and 27.7% YoY to | 9,997
crore (I-direct estimate: | 9,762 crore). Rupee IT services revenues
grew 11.4% QoQ to | 7,608 crore vs. our | 7,461 crore estimate. At
20.8%, IT services EBIT margin expansion was a modest 80 bps and
below our 21% estimate. Consolidated EBITDA margins improved
96 bps QoQ to 19.8% (20.1% estimate). Consolidated PAT of | 1,456
crore (| 1,435 crore estimate) increased 12% QoQ, marginally above
our 10% growth estimate.
ƒ Attrition continues to improve
Efforts to contain attrition have paid off with voluntary trailing twelve
month (TTM) attrition declining 210 percentage points (pp) to 19%
vs. 21.1% in Q2 while voluntary quarterly annualised attrition
declined 430 pps to 14.2% vs. 18.5% in Q2. Quarterly BPO attrition
declined 20 pps to 13.9% vs. 14.1%.
V a l u a t i o n
We expect FY12E and FY13E rupee revenue/EPS to grow by 20.5%/13.3%
and 11.5%/6.2%, respectively. This translates to revenue/EPS CAGR of
15.4%/11.2% over FY10-FY13E. We have valued the stock at 14.6x {
below its historical (since April 2007) one-year forward PE average of
17.7x to account for the anaemic organic growth} our FY13E EPS
estimate of |26 and maintain our HOLD rating with a price target of | 380
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D e l i v e r s o n w e a k e x p e c t a t i o n s
Wipro reported its Q3FY12 numbers above our/consensus’ moderated
expectations. IT services revenues grew 11.4% to | 7,608 crore and were
above our | 7,461 crore estimate. Despite SAIC’s integration, US$
revenues grew 2.2% QoQ to $1.505 billion vs. our $1.507 billion estimate
and came in at the lower end of the guided range of 2-4% QoQ growth.
Even constant currency growth of 4.5% was in-line with TCS (4.5%) and
Infosys (4.4%) while volume growth of 1.8% was way below our 3.2%
estimate. Though the Q4 revenue guidance of 0-2% QoQ growth appears
better than Infosys (0%), we highlight that excluding SAIC’s revenue
contribution of $40 million (quarterly run-rate), organic Q4 QoQ growth
guidance could have been -1.7 to 0.3%. Our belief of misleading organic
growth stays and continues to influence our HOLD rating.
ƒ Result analysis
Consolidated revenues grew 9.9% QoQ and 27.7% YoY to | 9,997
crore (I-direct estimate: | 9,762 crore). Rupee IT services revenues
grew 11.4% QoQ to | 7,608 crore vs. our | 7,461 crore estimate. At
20.8%, IT services EBIT margin expansion was a modest 80 bps and
below our 21% estimate. Consolidated EBITDA margins improved
96 bps QoQ to 19.8% (20.1% estimate). Consolidated PAT of | 1,456
crore (| 1,435 crore estimate) increased 12% QoQ, marginally above
our 10% growth estimate.
ƒ Attrition continues to improve
Efforts to contain attrition have paid off with voluntary trailing twelve
month (TTM) attrition declining 210 percentage points (pp) to 19%
vs. 21.1% in Q2 while voluntary quarterly annualised attrition
declined 430 pps to 14.2% vs. 18.5% in Q2. Quarterly BPO attrition
declined 20 pps to 13.9% vs. 14.1%.
V a l u a t i o n
We expect FY12E and FY13E rupee revenue/EPS to grow by 20.5%/13.3%
and 11.5%/6.2%, respectively. This translates to revenue/EPS CAGR of
15.4%/11.2% over FY10-FY13E. We have valued the stock at 14.6x {
below its historical (since April 2007) one-year forward PE average of
17.7x to account for the anaemic organic growth} our FY13E EPS
estimate of |26 and maintain our HOLD rating with a price target of | 380
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