Wipro Q3 Results Review - Disconnect Between Order Book, Growth Concerning: Motilal Oswal
Mgmt indicated that near-term deal conversion was affected by slower decision-making and a longer tenure of transformation deals
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Motilal Oswal Report
Wipro Ltd. reported Q3 FY23 IT services revenue growth of 0.6% QoQ constant currency (inline) due to weak macro and furloughs. Despite the easy Q3 comp (among the weakest topline growth in our large cap IT services coverage) and strong order intake ($4.3 billion, 1.5 times book-to-bill), Wipro has guided for a muted Q4 U.S. dollar CC revenue growth of down 0.6% to 1.0% QoQ.
Q3 Ebit margin in IT services was up 120bp QoQ to 16.3%, ahead of our expectation of 15.4% due to better employee cost control and the reversal of one-off costs incurred last quarter.
We were disappointed by Wipro’s weak implied Q4 FY23 revenue growth guidance, given the continued strength in deal momentum over the last few quarters.
Management indicated that near-term deal conversion was affected by slower decision-making (macro overhang) and a longer tenure (four-five years) of transformation deals, especially the ones with hyperscalars (44% contribution of the total total contract value).
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