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Wipro Ltd Research Report - 25th Jul 2016

IT | Published on Jul 25th 2016

IT

For 1QFY2017, Wipro posted a 2.6% sequential growth in its IT services revenues to US$1,930.8mn (V/s our expectation of US$1,925mn), while in constant currency (CC) terms the growth was of 2.2% qoq. In terms of geography, the growth was driven by the USA, which contributed ~53.5% of sales V/s 52.7% in 4QFY2016. On the operating front, EBIT margins came in at 16.1% (V/s 17.1% expected), a dip of 210bp qoq. The PAT for the quarter, at Rs2,052cr, came in lower than our expectation of Rs2,174cr, and declined by 8.2% on a sequential basis. The company has given a revenue guidance of US$1,901-1,939mn for 2QFY2017, which translates into a qoq CC growth of 0%-1.0%. We recommend an Accumulate on the stock. Quarterly highlights: For 1QFY2017, the company posted a 2.6% sequential growth in its IT services revenues to US$1,930.8mn (V/s our expectation of US$1,925mn), while in constant currency (CC) terms the growth was of 2.2% qoq. In terms of geography, the growth was driven by the USA, which contributed ~53.5% of sales V/s 52.7% in 4QFY2016. In terms of industries, growth was led by Healthcare and Life Sciences & Services which contributed 15.3% of sales V/s 12.0% in 4QFY2016. On the operating front, the EBIT margin came in at 16.1% (V/s 17.1% expected), a dip of 210bp qoq. Consequently, the PAT came in at `2,059cr (V/s `2,174cr expected), posting a qoq de-growth of 8.2%. Outlook and valuation: The Management has set a target of US$15bn of revenue and an EBIT margin of 23% by 2020. The company achieving the revenue target would imply a CAGR of 20% in sales over the next four years. However the near term guidance suggests a moderate organic growth. We expect USD and INR revenue CAGR for IT services to be at 8.4% and 7.9%, respectively, over FY2016-18E. We recommend an Accumulate on the stock, given the valuations.

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Accumulate

CMP 539
Target Price 582
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)110,956.64
MCAP NSE (Rs in Cr)111,005.26
P/E (x)12.91
EPS (Rs.)35.36
BV (Rs.)176.27
Div Yield (%)1.33
FV (Rs.)2.00
P/BV (x)2.31
EV/Sales (x)2.16
EV/EBITDA (x)10.53

Shareholding Pattern (%)

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

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