Tuesday, April 25, 2017

#Wipro 4QFY17 Guidance disappointing

 Revenue at US$ 1,955mn (+2.7% QoQ, 1.7% CC) higher than expectation of US$ 1,935mn. Digital (22.1% of revenue) grew +4.8% QoQ led by Appirio acquisition. The legacy business (ex-digital) grew 2.2% QoQ, led by Energy (+3.5% QoQ, second consecutive quarter of growth) and Manufacturing (+5.0% QoQ).

•             US$ revenue growth guidance of US$1,915/1,955 for 1QFY18E, implying a growth of -2.0/0.0% QoQ is lower than expectation and indicates concern in legacy business.

•             Strategy around top-account mining is yielding results, grew 6.4% QoQ, Top 5/10 grew 2.7/2.7% QoQ.

•             IT Services EBIT margin expanded 55 bps QoQ to 18.3% despite integration of low margin Appirio acquisition led by 290bps expansion in utilisation excluding trainees.

•             From a service line perspective, IMS (+2.4% QoQ), Analytics (+1.3% QoQ) and Application services (+5.7%) contributed to growth while BPO declined 5.0% QoQ due to issue in health plan services.

•             PAT stood at Rs 22.61bn (+7.2% QoQ), which includes an extraordinary income of Rs 4.08 from the sale of the EcoEnergy division. APAT stood at RS 18.53bn down 12.2% QoQ.

•             Wipro announced a bonus issue of 1:1, which is sentimentally positive.

•             Overall organic growth engine for Wipro remains challenged and recovery is taking longer than expected. However Wipro has been aggressive in acquiring companies with Digital capabilities but it’s not enough to backfill the loss from legacy.