Wipro Q4 Results Review - Total Contract Value Trend Unimpressive: Systematix

Systematix Research Report

Wipro Ltd.’s Q4 revenue remains weak but within the guided range. The positive surprise in margins came from cost rationalization. The company ended FY24 with a revenue decline of 3.8% YoY versus growth of 4.1% declared by Tata Consultancy Services Ltd. and 1.9% by Infosys in USD terms.

We expect the divergence between Wipro and TCS, Infosys to continue in FY25, as Wipro-

1. continues to have weak total total contract trend compared to TCS, which has been showcasing a healthy trend and Infosys, where large deal TCV is healthy,

2. has higher exposure to the consulting business, which has been a pain point (Accenture too has been facing pressure in its consulting business),

3. has seen several management exits recently, including that of the CEO and chief growth officer.

Appointment of an internal candidate as a CEO could bring some stability at the top layer (geo, vertical heads), as external candidates typically bring in their own leaders, thereby triggering changes.

We observed certain positive trends during the quarter-

1. top client/ top five clients / top 10 clients’ revenue growth (22% revenue comes from the Top 10) turned positive YoY and QoQ, after few quarters of decline,

2. the BFSI vertical reported positive QoQ growth post few quarters of decline (Capco business sits here).

We need to be sure of a sustained trend to conclude growth recovery. We reiterate 1.6% compound annual growth rate in USD revenue over FY23-26E.

However, margin expansion seems limited for now, given the high utilization and flat QoQ attrition, in our view.

We have built 50 bps margin improvement (140 bps earlier) over FY23-26E. We maintain Hold with a revised target price of Rs 430 (Rs 440 earlier), based on 17 times FY26E earnings per share.

Revenue growth catch up with peers and higher-than-expected margin expansion are key upside risks to our estimates.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.