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Wipro Ltd Research Report - 23rd Feb 2016

IT | Published on Feb 23rd 2016

IT

Wipro posted lower than expected numbers on all fronts for 3QFY2016. IT Services posted a 0.3% sequential growth in USD revenues to US$1,838mn (V/s an expected US$1,841mn). In constant currency (CC) terms, IT Services posted a 1.4% QoQ growth. On the operating front, the EBITDA margin came in at 20.6% V/s 21.8% in 2QFY2016, ie a downtick of 121bp QoQ. Consequently, the PAT came in at Rs2,234cr (V/s an expected Rs2,318cr), a de-growth of 0.1% QoQ. For 4QFY2016, the company has guided for revenue of US$1,875-1,912mn, a QoQ growth of 2.0-4.0%. We maintain our Buy recommendation on the stock with a price target of Rs670. Quarterly highlights: During 3QFY2016, the company posted lower than expected numbers on all fronts. IT Services posted a 0.3% sequential growth in USD revenues to US$1,838mn (V/s an expected US$1,841mn). In CC terms, IT Services posted a 1.4% QoQ growth. On the operating front, the EBITDA margin came in at 20.6% V/s 21.8% in 2QFY2016, ie a downtick of 121bp QoQ. Consequently, the PAT came in at Rs2,234cr (V/s an expected Rs2,318cr) a degrowth of 0.1% QoQ. Among other operating matrix, the gross utilization levels dropped to 66.4% V/s 69.5% in 2QFY2016. Net utilization (excl support) dropped to 73.8% V/s 77.2% in 2QFY2016. In terms of client addition, it added one client US$50mn+ and some other major ones in small order sizes. Overall, 39 clients were added 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, its strong business pipeline and with demand from the US sustaining. We expect USD and INR revenue CAGR for IT services to be at 7.0% and 11.5%, respectively, over FY2015-17E. We recommend a Buy.

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CMP 547
Target Price 670
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)111,843.90
MCAP NSE (Rs in Cr)111,916.83
P/E (x)13.01
EPS (Rs.)35.36
BV (Rs.)176.27
Div Yield (%)1.32
FV (Rs.)2.00
P/BV (x)2.33
EV/Sales (x)2.18
EV/EBITDA (x)10.62

Shareholding Pattern (%)

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

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