Wipro an outperformer; target of Rs 685: Man Financial

Wipro BSE | NSE 25/05/12 Are Mutual Funds betting on Wipro?

Man Financial has recommended outperformer rating on Wipro with a target of Rs 685.

 

Man Financial report Wipro:

 

Results are better than expectations

 

Wipro's global IT Q4FY07 revenue grew higher than our expectations at 6% QoQ (31.5% YoY) at Rs 30.48bn (USD 690.7mn), higher than its guidance of USD 685mn. Volume growth was at 5.4% (9.3% in Q3FY07). Organic growth in IT services was at 5% QoQ and revenue from acquisitions grew by 14.5% QoQ to Rs 1.6bn. BPO posted a strong growth of 11.8% QoQ (26.1% YoY) to Rs 2.6bn.

 

Global IT operating margins declined marginally, by 20bps, to 24%. Margins were impacted by 60bps due to the onsite salary hike of 2-3% and 30bps due to rupee appreciation, absorbed by higher utilisation and price realisation.

 

Total revenue growth was 8.8% QoQ at Rs 43.3bn with a strong growth in India and APAC which grew by 11.8% QoQ.

 

Overall EBITDA margins declined by 40bps

 

Net profit grew by 11.8% QoQ at Rs 8.56bn, led by higher other income of Rs 1,015mn as compared to Rs 825mn

 

Q1FY08 revenue guidance of US$ 711mn implies a 2.9% QoQ growth, which seems to be muted, however, this in line with the trend due to the seasonality effect.

 

Wipro's YoY IT headcount growth in the quarter was 33.7%; BPO employees were higher by 17% as compared to Q3FY07.

 

Attrition in IT services inched up slightly from 16.2% in Q3FY07 to 16.9% and that of BPO employees from 24% in Q3FY07 to 25%.

 

Valuation

 

At the CMP of Rs 571, the stock is trading at 22.1x FY08E and 17.1x FY09E our earnings of Rs 25.9 and Rs 33.4 for FY08E and FY09E, respectively. We maintain our Outperformer recommendation.