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Wipro Ltd. (Wipro) | Q2FY14 Result Update




IndiaNivesh Securities Pvt Ltd


23 Oct 2013





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Wipro Ltd. (Wipro) | Q2FY14 Result Update In-line Q3FY14 $-revenue Guidance; Limited upside potential: Downgrade to HOLD Q2FY14 Results Highlights: Wipro Ltd (Wipro) Q2FY14 performance was largely in-line with our expectations on all fronts. IT services $Revenue grew by 2.7% Q/Q to $1631 mn (INSPL est $1632 mn) led by Global IT, BPO and Infocrossing services, partially offset by decline in IMEA segment. Consolidated rupee revenue went up 12.9% Q/Q to Rs.109.9 bn (v/s Rs. 97.3 bn in Q1FY14) driven by IT services (+12.7% Q/Q) and System & Services/Products (+14.8% Q/Q). During the quarter, EBIT grew by 26.8% Q/Q to Rs.22.4 bn driven by IT Services EBIT (+26.9% Q/Q) and System & Services/Product EBIT (16.0% Q/Q). EBIT margin performance during the quarter expanded at 20.4% (v/s 18.2% in Q1FY14). Interest Charge/other income during the quarter stood at Rs.656mn/Rs.3412mn (v/s Rs.495mn/Rs.3361mn in Q1FY14), respectively. The company’s tax rate during the quarter was 23% (v/s 21% in Q1FY14). During the quarter, Wipro reported net forex gain of Rs.160 mn v/s Rs. 1656mn of forex gain in Q1FY14. Net profit went up 19.2% Q/Q to Rs19.4 bn, which was slightly ahead of INSPL estimate of Rs.18.4bn. Adjusting other income & forex, net income went up 40.6% Q/Q to Rs.15.8 bn (v/s Rs. 11.3 bn in Q1FY14). Valuations: At CMP of Rs.515, the stock is trading at P/E multiple of 17.7x FY14E and 15.8x FY15E revised earnings estimate. Third quarter FY14 $-revenue guidance remains the positive surprise. Further, uptake in discretionary budget and slight revival in global economy could lead to outperformance. Wipro’s re-organization to reduce overlaps, improve deals flow started paying in the form of $-revenue growth. However, due to limited upside potential, we downgrade our rating to HOLD from BUY but revise our target price upward to Rs.546 [valuing at 16.9x FY15e] from Rs.442 on Wipro.

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