Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Wipro - 2QFY22 Result Update - Continued Growth Outperformance; Raise TP to Rs760 - Reliance Research

Posted On: 2021-10-14 22:35:14 (Time Zone: IST)


All-round Beat on Revenue Growth and EBIT Margin

Wipro's (WPRO) 2QFY22 IT services revenue grew by 6.9% QoQ to US$2.58bn, 0.7% ahead of our estimate of US$2.56bn. Sequential growth came in at 8.1% in CC terms (organic 4.5%), ahead of our estimate of 6.6%, driven by a solid broad-based organic growth and higher-than-expected contribution from acquisitions (Capco and Ampion). EBIT margin of IT services business is at 17.7%, above our estimate of 17.3%, driven by a higher-than-expected operating leverage. Net income stood at Rs29.3bn, 2.8% ahead of our expectation of Rs28.5bn, led by the higher revenue growth and better margins. Large deal TCV (deals of more than USS$30mn) came in at US$580mn, which was slightly softer. The company remained optimistic on the demand environment, which was encouraging. Management guided 3QFY22 revenue from IT Services business will be at US$2.63-2.68bn. This translates to a sequential growth of 2-4%, which was ahead of our estimate of 1.5-3.5%. We expect the recent restructuring efforts, which include a simplified operating structure, step-up in capability upgrade and talent management to bode well for WPRO in the medium term. We raise FY22E-FY24E EPS estimates by 12.7-15.6% (previous note of Mar'21), driven by an improved revenue growth visibility and margin profile. We retain our BUY recommendation and raise the target price to Rs760 (vs. the prior Rs565) and value the stock at 26x (earlier 22x) FY24E earnings.

Attrition to Inch Up Higher in Coming Quarters

1) Among verticals, growth was led by, financial services and insurance (12.5% QoQ), communication (8.9% QoQ) and consumer (7.7% QoQ). 2) Among geographies, growth was particularly strong in Europe (9.2% QoQ) and APMEA (9.6% QoQ). 3) Voluntary TTM attrition in IT services stood at 20.5%, compared to 15.5% in 1QFY22. Management expects attrition to rise in the next couple of quarters and then ease out. 4) During 2QFY22, the company added a net work force of ~12k employees. 5) US$100mn+ client bucket and US$50mn+ client bucket grew by 2 each to 15 and 44, respectively.

Execution Remained Better Than Expected

EBIT margin of IT services business came in at 17.7%, above our estimate of 17.3%, driven by a higher-than-expected operating leverage and lower-than-expected integration cost of recent acquisitions. During the quarter, WPRO also accounted the salary increment for 80% of employees. We expect a limited margin upside for FY22 due to the higher SG&A cost (higher attrition and resumption of offices), rising attrtion levels and accelerated hiring over the next two quarters. We estimate an EBIT margin of 18.2-19% over FY22E-FY24E.

Industry Leading Growth Deserves Multiple Rerating

At CMP, WPRO trades at 26.5x/23x FY23E/FY24E EPS, which is at 6% discount to the larger peers (TCS and Infosys). Restructuring efforts, which include a simplified operating structure, step-up in capability upgrade and talent management bode well for WPRO in the medium term. We expect WPRO's revenue to clock 15.9% (including acquisitions) CAGR over FY21-FY24E vs. 4% CAGR over FY17-FY20, driven by the recent large deal wins and focused efforts on prioritized sectors/geographies. Thus, we retain the BUY recommendation. We have shifted to a 1-year target price from the earlier 2-year. As we enter 2HFY22, instead of rolling forward the valuation, we maintain it based on FY24E earnings and shift to a 1-year target price of Rs760.

Link to the report

Shares of Wipro Limited was last trading in BSE at Rs. 707.55 as compared to the previous close of Rs. 672.55. The total number of shares traded during the day was 1883326 in over 35751 trades.

The stock hit an intraday high of Rs. 739.80 and intraday low of 695.00. The net turnover during the day was Rs. 1351463549.00.


Click here to send ur comments or to feedback@equitybulls.com

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Mutual Fund Review - November, 2021 - ICICI Direct

Natraj Proteins Ltd Q2FY22 PAT at Rs. 6.70 crore

PMC Fincorp Ltd reports PAT of Rs. 1.15 crore in Q2FY22

Alkyl Amines Chemicals Ltd Q2 PAT declines to Rs. 54.09 crores

Shangar Decor Ltd Q2FY22 net profit at Rs. 6.06 lakhs

Maintain SELL on Asian Paints - Demand rebound strong; profitability cut steeper - HDFC Securities

Mphasis - 2QFY22 Result Update - Growth Resiliency Continues; Raise Target Price - Reliance Research

Gateway Distriparks - Rail continues to drive earnings - ICICI Securities

JSW Steel - Start of EBITDA contraction cycle - ICICI Securities

Shoppers Stop - Beneficiary of faster than expected recovery - ICICI Securities

Asian Paints - Q2FY22 Result Update - ICICI Securities

TVS Motor Company - EVs now at the center of its global ambitions - ICICI Securities

Havells India - Strong demand across regions; profitability likely to be muted in H2FY22 - ICICI Securities

Tata Communications - Rising visibility on revenue growth - ICICI Securities

Angel Broking - Business momentum intact for strong earnings growth - ICICI Securities

Q2FY22 Result Update - Rallis India - ICICI Direct

Q2FY22 Result Update - Navin Fluorine - ICICI Direct

Q2FY22 Result Update - Shoppers Stop - ICICI Direct

Company Update - Mastek Ltd - ICICI Direct

Q2FY22 Result Update - JSW Steel - ICICI Direct

Q2FY22 Result Update - VST Industries - ICICI Direct

HDFC Life Insurance - Q2FY22 First Cut - ICICI Direct

Federal Bank - Q2FY22 First Cut - ICICI Direct

Company Update - Taj GVK Hotels - ICICI Direct

Q2FY22 Result Update - Indian Hotels - ICICI Direct

Inox Leisure - Q2FY22 First Cut - ICICI Direct

Supreme Industries - Q2FY22 First Cut - ICICI Direct

Q2FY22 Result Update - Biocon Ltd - ICICI Direct

PVR Ltd - Q2FY22 First Cut - ICICI Direct

Q2FY22 Result Update - Asian Paints - ICICI Direct

Quant Pick - RBL Bank - ICICI Direct

Q2FY22 Result Update - IIFL Securities - ICICI Direct

Q2FY22 Company Update - Bank of Baroda - ICICI Direct

Q2FY22 Result Update - Syngene International - ICICI Direct

Company Update - Sonata Software - ICICI Direct

Q2FY22 Result Update - Gateway Distriparks - ICICI Direct

Q2FY22 Result Update - Tata Communications - ICICI Direct

Q2FY22 Result Update - Havells India - ICICI Direct

Mphasis - 2QFY22 Result Update - Growth Resiliency Continues; Raise Target Price - Reliance Research

Maintain ADD on Havells India - Outperformance continues; miss on margin - HDFC Securities

Indraprastha Gas - Company Update - EV vs CNG; TCO Economics Favour CNG - Reliance Research

FinTech Playbook - Discount Brokers - 'Nudging' the long tail of standalone brokers - HDFC Securities

Tata Communication - Revenue growth remains muted - YES Securities

Havells India Ltd - Q2FY22 Result Update - YES Securities

ICICI Lombard General Insurance - Q2FY22 Result Update - YES Securities

Syngene International Ltd - Lack of near term triggers - YES Securities

Mphasis - Q2FY22 First Cut - YES Securities

IndiaMART InterMESH - Q2FY22 First Cut - YES Securities

Sterlite Technologies - Q2FY22 First Cut - YES Securities

Can Fin Homes - Q2FY22 First Cut - YES Securities


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020