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Informist, Thursday, Jul 18, 2024

 

By Darshan Nakhwa

 

MUMBAI – Wipro Ltd is expected to report a muted financial performance for the June quarter due to weakness across most verticals and low discretionary spending by clients, according to brokerages. Wipro's consolidated revenue is seen at 222.09 bln rupees, flat on quarter but down nearly 3% on year, according to an average of estimates from 12 brokerage firms. The estimates for vary from 224.97 bln rupees to 219.77 bln rupees.

 

The Bengaluru-based company's net profit for Apr-Jun is seen at 29.63 bln rupees, up nearly 5% sequentially and 3% from a year ago. The highest estimate for net profit is 30.59 bln rupees and the lowest is 28.71 bln rupees.

 

According to an average of estimates from eight brokerages, Wipro's earnings before interest and tax margin is seen at 16.3%. It had reported an EBIT margin of 15.9% a quarter ago and 15.1% a year ago. According to most of the brokerages, the company's margin is expected to expand sequentially due to cost control and efficiency measures. However, Indsec Securities and Finance and Motilal Oswal Financial Securities expect the information technology services player's margin to contract by around 10 bps sequentially.

 

Wipro is scheduled to announce its results for the quarter ended June on Friday.

 

The company's total contract value for the Apr-Jun quarter is seen around $3 bln. "In terms of total contract value, Wipro has been delivering $3 bln+ for the last six consecutive quarters with 4QFY24 TCV at a healthy $3.6 bln, and we expect the metric to not fall below $3 bln," said Nirmal Bang Equities. "This comes on the back of Wipro's efforts to let go of some small and loss-making accounts and chase larger deals."

 

Kotak Institutional Equities expects Wipro to report strong deal signings for the June quarter. "Wipro announced its first mega deal since 2021 in the communications vertical. The company has signed other deals as well, besides the mega deal announced recently," the brokerage said. In June, Wipro bagged a five-year order worth $500 mln from a leading communication services provider in the US. Under the contract, Wipro will provide managed services for some products and industry-specific solutions.

 

KEY MONITORABLES

Commentary on large deal wins, deal pipeline to revenue conversion, recovery in the consulting business, and guidance for Jul-Sep will be key monitorables, according to brokerages.

 

Investors will look forward to comments from the management on the large deal wins, especially artificial intelligence deals and its connection with revenue growth, and deal ramp-up, IDBI Capital said in a pre-earnings note.

 

The Street will also look out for reasons for continued attrition in senior leadership, and its impact on business. In April, Thierry Delaporte resigned from the posts of chief executive officer and managing director of the company. Last year, in September, Jatin Dalal resigned as the chief financial officer. Investors will also look out for comments on strategic initiatives from the new management.

 

Investors will also look for Jul-Sep outlook, positioning in cost-take out and vendor consolidation deals, and margin levers to meet aspirational level of over 17%. The Street will also take into account the management's commentary on large and small deal wins.

 

Today, shares of Wipro closed 2.4% higher at 573.20 rupees on the National Stock Exchange.

 

Following are the Apr-Jun earnings estimates of Wipro based on reports compiled by Informist from 12 brokerages:

 

Brokerage firm	Net sales (in mln rupees)	$ Revenue	Net profit  (in mln rupees)	EBITDA  (in mln rupees)	EBIT Margin (in %)
Anand Rathi Share and Stock Brokers Ltd	221,653	2,647	----	44,673	16.20
IDBI Capital Market Services Ltd	220,359	2,655	30,588	----	16.37
Incred Research Services Pvt Ltd	222,325	2,658	29,922	----	16.50
Indsec Securities and Finance Ltd	222,300	2,700	29,400	----	16.00
Kotak Institutional Equities	221,959	2,653	30,246	44,268	16.60
KR Choksey Research	224,970	29,921	----	----	----
Motilal Oswal Financial Services Ltd	222,000	2,646	29,000	44,000	15.80
Nirmal Bang Equities Pvt Ltd	219,770	----	29,440	----	15.10
Nomura Equity Research	222,386	2,649	----	----	16.20
Nuvama Wealth Management	222,575	----	----	43,676	----
PhillipCapital (India) Pvt Ltd	223,567	2,665	29,555	----	16.60
Prabhudas Lilladher Pvt Ltd	221,300	2,642.3	28,900	----	----
Sharekhan Ltd	222,320	----	29,910	----	----
Average	222,092	2,658	29,627	44,154	16.30

 

End

 

Edited by Ashish Shirke

 

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