Wipro Q1 Review - Weak Execution Continues With FY24E Revenue Growth Likely To Decline: ICICI Securities

"BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .ICICI Securities Report.Wipro Ltd.'s IT services’ revenue declined 2.8% QoQ constant currency (-1.6% QoQ U.S. dollar) lower than ours and BBG consensus estimates of -1.3% QoQ USD and -1.8% QoQ USD, respectively. YoY CC growth in IT services revenue was also soft at 1.1%. Softness in revenue growth was due to reduction in discretionary spends. Weakness in growth continued in the company’s two large verticals – banking, financial services and insurance (-4.3% QoQ CC) and consumer (-3.5% QoQ). IT services’ Ebit margin came in at 16% (-30 basis points QoQ). Consolidated Ebit margin at 15.1%, down 70 bps QoQ, was lower than our and consensus estimates of 15.9% and 15.7% respectively. Overall profit after tax at Rs 28,701 million was 8% lower than our estimate due to miss on revenue and margins, and higher tax rate. Wipro reported muted total bookings of $3.7 billion, down 10% QoQ. Within total bookings, large deal bookings were healthy at $1.2 billion (+9% QoQ, +9% YoY) reflecting slowdown or drying up of smaller deals. Revenue guidance for Q2 FY24 is soft at -2% to +1% QoQ CC, lower than our expectation of 0-2% QoQ. Management commentary did not provide any visibility of pickup in demand ahead. Wipro saw huge reduction (-2.8% QoQ, -3.4% YoY) in net headcount during the quarter..What to do with the stock Wipro’s Q1 FY24 performance missed estimates on all fronts: Ebit missed our / Bloomberg estimates by 6%/4%,orderbook was weak (down 10% QoQ), andQoQ revenue growth guidance for Q2 FY24 at -2% to +1% falls short of our expectation of 0- 2% growth. Based on the recently-announced results of Accenture, Tata Consultancy Services Ltd., HCL Technologies Ltd. and Wipro (both Accenture and Wipro’s guidance for the next quarter at mid-point are indicating further decline in revenues) and from demand commentary, it is evident that the companies aren’t seeing any immediate demand revival in Q2 FY24 and that visibility of recovery in H2 FY24 too is limited at this stage. This, we believe, could be largely due to multiple low-return on investment discretionary projects executed over past two years now getting cancelled or seeing rampdowns amid adverse macro conditions – particularly in banking, retail, hi-tech and telecom verticals. Lack of visibility around the revival of these projects is dissuading company managements from guiding for strong recovery in H2 FY24 in our view, despite decent order booking momentum – particularly in the case of our 'Buy'-rated TCS. In the case of Wipro, we cut our earnings per share estimates sharply by 11%/9%/7% over FY24E/FY25E/FY26E due to weaker revenue growth, lower margins and higher tax rates. This leads to our revised 12-month target price of Rs 319 implying 19% potential downside..Click on the attachment to read the full report:.Wipro Q1 Results Review - Miss On All Fronts; Management Lowers Guidance: Axis Securities.DISCLAIMERThis report is authored by an external party. BQ Prime 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 BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner."

Wipro Q1 Review - Weak Execution Continues With FY24E Revenue Growth Likely To Decline: ICICI Securities

Revenue guidance for Q2 FY24 is soft at -2% to +1% QoQ constant currency, lower than our expectation.

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Wipro Q1 Review - Weak Execution Continues With FY24E Revenue Growth Likely To Decline: ICICI Securities

Revenue guidance for Q2 FY24 is soft at -2% to +1% QoQ constant currency, lower than our expectation.

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