Thursday, July 15, 2021

Wipro Jun'21 Quarter Results - Strong Broad Based Growth Performance; Margins Moderates


Actual vs. expectations

Revenues were above our estimates while EBIT margins were 100bps below our estimates.

Likely stock reaction

Positive

Key positives - 8 large deals (TCV >USD30mn) closed during Q1 with combined TCV of USD715mn, broad based sequential growth performance.

Result Summary

·         Wipro reported revenues of USD 2.4bn, up 12.2%/25.7% QoQ/YoY (CC 12%/21.3% QoQ/YoY), above our expectations of USD2.35bn. Organic revenue for Q1 was ~4.9% QoQ CC. (TCS Q1FY22 revenues was US$ 6.15bn, 2.4% CC QoQ; Infosys Q1FY22 revenues was US$3.78bn, 4.8% CC QoQ)

·         IT services EBITM declined 320bps sequentially on account of integration of low margin Capco business and several senior leadership hires during the quarter to 17.8%; 100bps below our estimates. (TCS Adj. EBITM fell 130bps QoQ to 25.5%; Infosys Adj EBITM declined 80bps QoQ to 23.7%)

·         Adj. Profits at Rs32.3bn (8.7% QoQ, 35.2% YoY), ~10.5% ahead of our expectations due to higher other income (includes Rs2,150mn on account of fulfilment of business targets pertaining to sale of hosted data centre business) and  lower taxes.

·         Q2FY22 revenue growth guidance: Company guided Q2FY22 sequential growth to be in the range of 5% - 7%.

Growth by Verticals (all in constant currency terms)

·         Financial Services:  31.3%YoY ( V/s 0.6% YoY in Mar'21 quarter)

·         Manufacturing: 5%YoY ( V/s -2.8% YoY in Mar'21 quarter)

·         Healthcare: 8.9%YoY( V/s -1.6% YoY in Mar'21 quarter)

·         Communications: 19%YoY ( V/s -11.4% YoY in Mar'21 quarter)

·         Energy: 16.4% YoY ( V/s 0.1% YoY in Mar'21 quarter)

·         Consumer Business Unit: 33.5% YoY ( V/s 2.9% YoY in Mar'21 quarter)

·         Technology: 12.3% YoY ( V/s 7.1% YoY in Mar'21 quarter)

Growth by Strategic market units (all in constant currency terms)

·         Americas 1: 18% YoY ( V/s 1.2 YoY in Mar'21 quarter)

·         Americas 2: 24% YoY ( V/s 1.6% YoY in Mar'21 quarter)

·         Europe: 32.5% YoY ( V/s 2% YoY in Mar'21 quarter)

·         APMEA : 0.8% YoY ( V/s -6.3% YoY in Mar'21 quarter)

Manpower details

Total Headcount: 209,890, up  12,178 QoQ

LTM Attrition: 15.5%, V/s 12.1% in Mar'21 quarter and 11% in Dec'20 quarter.

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