Dear All,
Forwarding you the Result Update on Wipro for 4QFY2011 with an Accumulate recommendation and a Target Price of `489 (12 months).
For 4QFY2011, Wipro reported slightly better-than-expected numbers on the revenue front but stood muted on the operational front. Revenue for IT services came in at US$1,400mn, up 4.2% qoq. However, EBIT margin for the IT services segment declined by 14bp qoq to 22.1%. Revenue guidance for the IT services segment for 1QFY2012 was disappointing at US$1.394bn–1.422bn. Wipro continues to lag its peers and is undergoing new organisational restructuring at the top end, thus we expect volumes to remain tepid. We continue to maintain our Accumulate view on the stock.
Mixed bag quarter: For 4QFY2011, Wipro registered 6.0% qoq growth in revenue to `8,302cr. Volume growth of the IT services segment came in tepid at 1.9% qoq. Revenue from IT products and consumer care and lightening segments grew by 2.3% and 19.1% yoy, respectively. Overall EBIT margin declined by 52bp qoq to 17.8% on the back of a decline in EBIT margin in all the three business segments. EBIT margin of the IT services, IT products and consumer care and lightening segments declined by 14bp, 99bp and 29bp qoq to 22.1%, 3.6% and 12.0%, respectively. PAT came in at `1,375cr qoq, up 4.3% qoq.
Outlook and valuation: In FY2011, Wipro added incremental revenue of only US$830mn vis-à-vis Infosys, TCS and Cognizant (in CY2010) adding whopping US$1.23bn, US$1.83bn and US$1.31bn, respectively. Further, the company guided for much-muted revenue growth for 1QFY2012, with mere 1.2% growth on the upper end. With this kind of revenue guidance, clearly Cognizant is poised to overtake in terms of revenue run-rate in 2QCY2011 itself. Thus, we expect revenue CAGR for IT services to be muted at 17.3% (dollar terms) over FY2011–13E vs. Infosys, TCS and HCL Tech with much higher rates of 23–24%. We value the company at 17x FY2013E EPS of `28.8. We maintain our Accumulate view on the stock with a target price of `489.
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If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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