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Wipro Ltd Research Report - 21st Jan 2016

IT | Published on Nov 02nd 2015

IT

Wipro posted a 2.1% qoq growth in IT revenue to US$1,832mn for 2QFY2016 (V/s an expected US$1,826mn). In Constant Currency terms (CC), the company posted a 3.1% qoq revenue growth. On the EBIDTA front, margins came in at 21.7% V/s an expected 21.3%. The EBIT margin came in at 19.0% V/s (18.7% expected), a qoq expansion of 44bp. The IT services segment posted an EBIT margin of 20.7% V/s 21.0% in 1QFY2016. Thus, the net profit came in at Rs2,235cr (V/s Rs2,223cr expected), a growth of 2.2% qoq. The company has guided towards sales of US$1,841-1,878mn for 3QFY2016, a growth of 0.5- 2.5%. The guidance factors in fewer working days in 3QFY2016 and slow rampup of clients. We currently have a Buy rating on the stock. Quarterly highlights: Wipro posted a 2.1% qoq growth in IT revenue to US$1,832mn for 2QFY2016 (V/s an expected US$1,826mn). In CC, the company posted a 3.1% qoq revenue growth. In rupee terms, the company posted a 1.2% qoq revenue growth to Rs12,514cr V/s an expected Rs12,703cr. On the EBIDTA front, margins came in at 21.7% V/s an expected 21.3%. The IT services segment posted an EBIT margin of 20.7% V/s 21.0% in 1QFY2016. In terms of the operating matrix, the net utilization level came in at 77.2% V/s 79.4% in 1QFY2016 and the attrition rate was 16.8% V/s 16.4% in 1QFY2016. The company added 1 client in the US$50mn+ bracket and 3 in US$10mn+ bracket, during the quarter. Outlook and valuation: The Management remains confident of revenue growth pick-up, citing momentum in large deal closures and win rates, uptick in discretionary spending, strong business pipeline and with demand from the US sustaining. We expect USD and INR revenue CAGR for IT services to be at 10.0% and 11.8%, respectively, over FY2015-17E. We recommend a Buy.

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CMP 573
Target Price 719
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)111,236.19
MCAP NSE (Rs in Cr)111,284.80
P/E (x)12.94
EPS (Rs.)35.36
BV (Rs.)176.27
Div Yield (%)1.32
FV (Rs.)2.00
P/BV (x)2.32
EV/Sales (x)2.17
EV/EBITDA (x)10.56

Shareholding Pattern (%)

Promoter73.0
Foreign14.0
Public & Others6.0
Institution5.0
Corporate2.0
Grand Total100.0

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