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Motilal Oswal Report
Wipro Ltd.'s IT Services revenue was down 0.3% QoQ in constant currency to $2.66 billion in Q4 FY24 (50 basis points below our estimate). The company's order intake declined 14% YoY to $3.6 billion, with large deal total contract value at $1.2 billion (up 9.5% QoQ). Management's Q1 FY25 revenue growth guidance was modest at -1.5% to +0.5% QoQ in CC terms.
Despite the decline in revenue, Wipro has managed to improve its IT Services Ebit margin by 40 bp to 16.4%, in line with consensus expectations. This was driven by better cost control and a reduced employee count.
While Wipro's Q4 FY24 performance was largely in line with consensus, management highlighted a persistently weak demand environment and ongoing ramp-downs in existing books. Further, a few small-sized engagements continue to hinder near-term growth for the company.
We find the momentum at Capco encouraging, which signals early signs of improvement in the macro environment. While the near-term outlook for consulting remains robust, the leakage in existing books and weaker demand for IT Services would continue to impact near-term growth adversely.
We trim our FY25E and FY26E earnings per share and reiterate our Neutral rating, as we view the current valuation as fair. Our target price implies 18 times FY26E EPS.
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