Wipro Q3 Results Review - Much Better Than Worst Fears: Nirmal Bang

Nirmal Bang Report

Wipro Ltd.'s revenue growth for Q3 FY24 at (1.7%) QoQ in constant currency terms came in at the upper end of guidance (-3.5% to -1.5%). It beat our estimate (3%) by 130 basis points. Also, this performance has come about despite some low-margin client rationalisation in Asia Pacific Middle East and Africa (impact not quantified).

The performance has been much better than street’s worst fears as it was expecting ‘wider and deeper’ furlough quarter. The sharp ADR performance (up 18% on January 12, 2024) is likely because of positioning.

Among the four companies that have announced results thus far for Q3 FY24, Wipro is the only one which has indicated green shoots in discretionary spending, where its consulting business (Capco) saw double-digit growth in order inflow QoQ. It however did not indicate how much the consulting order inflow was to take a call whether this would materially change things on the demand side. While order inflow was strong for the fifth consecutive quarter, Wipro gave a cautiously optimistic guidance of (1.5) - 0.5% QoQ CC growth for Q4 FY24. We are building in revenue growth at the upper end.

IT Services Ebit margin of 16% was only 10bps lower QoQ despite salary increases from Dec 01. 2023. This was better than our expectation by 40 bps. Wipro said margin would remain range-bound in the near term.

We have increased EPS estimates FY24-FY26 by ~3-5% largely due to better ‘other income’. We maintain a 'Sell' on Wipro with target price of Rs 384, which is based on target PE multiple of 14 times (30% discount to TCS) on Dec-25 EPS.

The high discount of 30% that we are assigning is due to its significantly below peer group revenue performance in the recent quarters and the significantly lower return on invested capital due to its inability to squeeze out enough value from its M&A moves.

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.