Wipro topline may rise 13% but a marginal uptick likely for bottomline in Q4

Wipro

With the two top IT players, TCS and Infosys, reporting below-the-expected numbers for the March 2023 quarter, all eyes are now on Wipro, which will report earnings on April 27.

The company is expected to post a year-on-year (YoY) growth of 2.2 percent in net profit to reach Rs 3,156 crore for the quarter ended March 2023, with estimates ranging from negative 2 percent to 5 percent. On a sequential basis, earnings are predicted to improve by 3.4 percent. Revenue is expected to come in at Rs 23,505 crore, with a YoY growth of 12.7 percent and a QoQ growth of 1.2 percent, according to a poll of brokerages.

On constant-currency basis

On a constant-currency (CC) basis, the Street expects revenue growth to be majorly flat and in line with the management guidance of negative 0.6 percent to 1 percent.

Growth should remain soft and within the management’s guidance provided in Q3 of FY23 due to slower revenue conversion and weakness in consulting, said Motilal Oswal.

Brokerage firm ICICI Securities projects CC growth at negative 0.5 percent QoQ translating to 11.5 percent YoY CC growth in FY23, which is near the lower end of the guided range of 11.5-12 percent for FY23, due to weakness in the consulting business and worsening macro environment.

“We expect flat revenue growth in CC terms and a cross-currency tailwind of 82 bps. Softness in the consulting business, BFSI, tech and retail verticals is expected to result in overall muted growth,” wrote analysts at JM Financial.

EBIT growth

Earnings before Interest and taxes (EBIT) are projected to come at Rs 3,746 crore, up 10.1 percent YoY and 3.3 percent QoQ. EBIT margin might see contraction on a yearly basis at 15.9 percent with slight expansion expected QoQ, as per the poll.

IDBI Capital forecasts EBIT margin to grow by 90 bps QoQ led by an uptick in utilisation.

“Reported EBIT margin will see a decline of 40bps due to a) higher sub-con after a seasonal decline in 3Q; b) slower growth limiting the scope of pulling up utilisation etc. However, we expect EBIT margins to be closer to 16 percent, the new base margin level as indicated by the company in 3Q,” said JM Financial.

Revenues

ICICI Securities believes Wipro’s revenue growth may remain anaemic and lag its peers due to a weaker growth outlook in BFSI (Banking, financial services and insurance) vertical (35 percent of revenue) and given that majority of Wipro’s revenue growth in the past has come from BFSI and retail verticals.

“We expect Wipro to guide for soft revenue growth of -1 percent to +1 percent QoQ CC for Q1FY24 because it is seeing a delay in conversion of TCV (total contract value) to revenue in certain projects,” said ICICI Securities, which maintains a ‘Hold’ rating on the company.

Other things to watch out for include the outlook for consulting business and tech budgets, revenue conversion, large deal wins, vertical-related commentary, especially BFSI, Consumer, Hi-tech and Manufacturing business units, attrition trends, M&A, capital allocation and overall macro outlook and demand environment.

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