Technology

Wipro’s 4QFY2016 results have come in below our expectations. The company’s
IT services posted a revenue of US$1,882mn (V/s US$1,902mn expected) up
2.4% qoq. This is against a revenue guidance of US$1,875mn to US$1,912mn
for the quarter. In constant currency (CC) terms, the company posted a qoq
revenue growth of 2.7%. On the operating front, IT Services’ EBIT margin stood at
20.1% while the overall EBIT margin came in at 18.2% (V/s 18.7% expected), ie
an expansion by 34bp qoq. The net profit for the quarter came in flat on a qoq
basis at Rs2,235cr (V/s Rs2,237cr expected). The company gave a guidance of IT
services revenues being in the range of US$1,901mn-US$1,939mn for
1QFY2017, posting a qoq growth of 1.0-3.0%. We maintain our buy
recommendation on the stock with a price target of Rs680.
Quarterly highlights: The company’s IT services posted a revenue of US$1,882mn
(V/s US$1,902mn expected) up 2.4% qoq. This is against a revenue guidance of
US$1,875mn to US$1,912mn for the quarter. In CC terms, the company posted
a qoq revenue growth of 2.7%. On the operating front, IT Services’ EBIT margin
stood at 20.1% while the overall EBIT margin came in at 18.2% (V/s 18.7%
expected), ie an expansion by 34bp qoq. The net profit for the quarter came in
flat on a qoq basis at Rs2,235cr (V/s Rs2,237cr expected). On the operating front,
the quarterly annualized voluntary attrition dropped from 16.3% in 3QFY2016 to
14.9% in 4QFY2016.
Outlook and valuation: The Management remains confident of the business
environment and has set a revenue target of US$15bn by 2020, implying a CAGR
of 20% over the next four years. However the near term guidance implies a moderate
organic growth. We expect USD and INR revenue CAGR for IT services to be at 12.1%
and 11.6%, respectively, over FY2016-18E. We recommend a Buy on the stock.

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