PremiumAzim Premji-backed Wipro has announced its financial results for the third quarter ending December 31, 2022 (Q3FY23) period. During the latest quarter, Wipro missed estimates on its top-line front, however, its profitability and operating margins exceeded expectations. Following the Q3 earnings, Wipro's stock will be in focus in the week ahead.
In Q3FY23, Wipro posted a consolidated net profit of ₹3,052.9 crore up by 2.8% QoQ and 15.24% YoY. Consolidated revenue came in at ₹23,229 crore rising by 3.06% QoQ and 14.35% YoY. In dollar terms, IT services segment revenue rose by 6.2% YoY to $2,803.5 million, while non-GAAP constant currency growth stood at 0.6% QoQ and 10.4% YoY. Also, the IT services operating margin for the quarter expanded by 120 bps QoQ to 16.3%.
Further, in the quarter, the company's total bookings rose by 26% YoY and large deal bookings surged by 69% YoY. Also, the company's attrition rate moderated for the fourth consecutive quarter in Q3 at 21.2%. However, Wipro reduced its workforce by 435 sequentially taking the total employees headcount to 258,744 as of December 31, 2022.
Wipro has declared an interim dividend of Re 1 per equity share for fiscal year FY23. To determine eligible shareholders, the company has fixed January 25 as the record date, while the payment is expected on or before February 10, 2023.
On Wipro's financial performance, Veer Trivedi, Research Analyst, SAMCO Securities said, "Wipro reported slightly disappointing results when it comes to its top line. The company’s QoQ revenue growth at 3.1% was a little subdued. Further, the revenue growth guidance for Q4 in constant currency (CC) terms is seen at -0.6% to 1% QoQ. On a full-year basis, it will likely underperform its peers. Top-line aside, the company did put a good show in its operating metrics, the margins improved 120 basis points QoQ and are expected to improve further too. The deal wins like its other leading peers were strong. Thus all-in-all, a slight miss on the top line & a good show on its margins and profitability."
According to Emkay Global's first cut note, Wipro's revenue tad below estimates while margins beat estimates. Also, Q4 guidance was below expectations.
Emkay's note said, "Wipro reported revenues of $2.8 billion, up 0.2%/6.2% QoQ/YoY (CC 0.6%/10.4% QoQ/YoY), a tad below our expectations of $2.81 billion/1% CC QoQ. (TCS Q3FY23 revenues was $ 7.07 billion, 2.2% CC QoQ; Infosys revenues was US$4.66bn, 2.4% CC QoQ; HCL revenues was US$3.24bn, 5% CC QoQ)."
Comparing Wipro's operating margins with peers, Emkay's note added, "IT services EBITM expanded by ~120bps sequentially to 16.3%, ~80 bps above our estimates, on the back of strong operational improvements and automation-led efficiencies which negated impact of salary increases and promotions. (TCS IT services EBITM grew ~50bps QoQ to 24.5%; Infosys EBITM was flat QoQ at 21.5%; HCL EBITM grew ~160bps QoQ to 19.6%)."
In regards to guidance, Emkay's note added, "IT services revenue is expected to grow in the range of -0.6% to 1% QoQ CC in Q4FY23 (below our expectations of 1-3%). Company expects FY23 revenue growth to be in the range of 11.5-12% YoY in CC term."
Emkay expects Wipro stock to react likely at 'Neutral' post Q3 results. Among key positives are -- margin beat, steady order book, and moderation in attrition rate.
Further, Mitul Shah - Head of Research at Reliance Securities said, "Wipro's revenue was broadly in line with our expectations while its margins were above our expectations. Its restructuring efforts, which include simplified operating structure, step-up in capability upgrade, and talent management under new leadership bode well for Wipro in the medium term. TTM attrition has also started falling supporting margin expansion. At present we have a BUY rating on WPRO."
Wipro announced its Q3 earnings post-market hours on Friday. The company's stock ended at ₹393.65 apiece broadly flat but in red on BSE compared to the previous day's closing price of ₹394.45 apiece. The company's market cap is nearly ₹2.16 lakh crore.
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