Emkay Global Financial's research report on Wipro
Wipro posted mixed operating performance in Q3. Margins came in above estimates, while Q3 revenue and Q4 growth guidance missed our expectations. Revenue growth in Q3 was impacted by furloughs, softness in discretionary spending, and delay in deal ramp-ups and revenue conversion because of macro uncertainties. Management highlighted pockets of weakness in retail, particularly in America, and technology verticals. Management remains cautiously optimistic about growth prospects and is closely monitoring the possible impact of macro uncertainties on demand and revenue conversion. Wipro reported a strong overall deal win TCV of USD4.3bn (up 26% YoY; includes 11 large deals with combined TCV of >USD1bn) translating into a book-to-bill ratio of ~1.5x. Wipro has guided -0.6% to 1% QoQ CC revenue growth in IT services for Q4, below our estimates, factoring in softness in discretionary spending and slower revenue conversion due to prevailing macro uncertainties. IT services’ EBITM grew 120bps to 16.3% in Q3, 80bps above our expectations, and is likely to serve as a base for margins and gradual improvement.
Outlook
We cut our earnings by <1% for FY23E-25E post Q3 performance. We maintain BUY with a TP of Rs470 at 17x Dec-24E EPS.
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