Wipro Ltd is likely to report subdued Q4 financial results, with a marginal fall in revenue and a small rise in net profit, as discretionary demand is yet to pick up.
Based on the average estimate from 13 brokerage firms compiled by Moneycontrol, Wipro's January-March revenue is expected to fall 0.4 percent quarter-on-quarter to Rs 22,117 crore. Net profit is expected to increase by two percent sequentially to Rs 2,747 crore.
However, on a year-on-year (YoY) basis, both revenue and net profit are seen falling 4.8 percent and 10 percent, respectively.
Analysts noted the ongoing challenges for Wipro in sectors like consulting and hi-tech. Wipro's significant exposure to the Banking, Financial Services and Insurance (BFSI) sector, accounting for over 30 percent of its portfolio, could further impact its revenue outlook.
Analysts split on EBIT margin outlook
Wipro's EBIT (Earnings Before Interest and Taxes) margin is likely to face downward pressure during the quarter due to the impact of recent wage increases and overall flat revenue growth. It is expected to fall 50 basis points sequentially to 15.50 percent based on the average estimates from 13 brokerage firms.
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Brokerages hold differing views on margin trends. While Antique Stock Broking, Dolat Capital, Sharekhan, and JM Financial anticipate a decline in margins, analysts at ICICI Securities, Jefferies, and Nomura predict a slight expansion in EBIT margins, driven by ongoing cost-efficiency measures.
Axis Securities believes that EBIT margin could find a bit of support from the tight cost-optimisation initiatives such as lower onsite expenses and strong volume growth.
Contrary to the majority, ICICI Securities expects a 20 basis points quarter-on-quarter increase in EBIT margin, attributing it to the conclusion of wage hikes in Q3FY24. "Wipro rolled out wage hike in December 2023. The quantum of wage hike and the number of employees covered in annual compensation cycle were lower than that in a normal year. Hence, we forecast 20 bps margin tailwind QoQ in Q4 given the absence of wage hikes," ICICI Securities said.
WIPRO Q4 PREVIEW
Key Monitarable: Revenue Guidance
Revenue guidance by brokerages for Wipro's first quarter of fiscal year 2024-25 (Q1 FY25) varies, ranging from 0-2 percent sequentially.
JM Financial, Nomura, and Dolat Capital are among the more optimistic brokerages, foreseeing growth between 0-2 percent for Q1 FY25. On the other hand, Emkay Global expects Wipro to provide guidance ranging from (-)1 - 1 percent.
The management commentary on future revenue prospects, amid ongoing economic uncertainties and sector-specific challenges, will be important to hear.
Investors will also look forward to management commentary on large deal win trajectory and ramp up, outlook on discretionary spends and key segments like financial services, deal flow generating revenues, and demand environment in the Capco business.
Nuvama said that the broking firm shall look for any updates on the consultancy business and improvement in deal execution.
On April 16, shares of Wipro ended 2.3 percent lower at Rs 449. Although the stock has gained over 24 percent in the past one year, it has shed 6 percent of its share value on a year-to-date basis.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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