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Wipro Q4 net beats estimates, but Q1 guidance disappoints

Friday, 18 April 2014 - 12:06pm IST | Place: Mumbai | Agency: dna

Like its peers that outsmarted D-Street expectations, Wipro, India's third largest software firm, reported a 29% rise in net profit to Rs 2,240 crore, as compared with Rs 2,027 crore in the same quarter a year ago.

This compares to Wipro's peers Infosys, TCS and HCLT, which reported yoy net profit growth of 25%, 48.2% and 59%, respectively.

Quarter-on-quarter, its net profit grew 10.6%.

On the revenue front, Wipro reported 21.7% year-on-year (yoy) growth in net sales at Rs 11,703.6 crore.

The IT major reported in-line dollar revenue growth of 2.5% qoq and 8.5% yoy at $1.72 billion, as compared with $1.58 billion a year earlier. In rupee terms, IT services revenues came in at Rs 10,620 crore, up 24% yoy (up 6.4% yoy in dollar terms at $6.62 billion).

For April-June, Wipro expects revenue from IT services to be in the range of $1,715-1,755 million.

Wipro management also reported highest Q4 operating profit margins in the last four quarters. Accordingly, IT services earnings before interest and taxation (EBIT) margins at 24.5%, up 150 bps sequentially as against expectations of slight decline. The margin improvement was aided by higher utlilisation, cost optimisation benefits and lower expenses. In actual terms, Ebitda rose 40.5% at Rs 2,582 crore in Q4, as compared with Rs 1,837 crore a year earlier.

While analysts were happy with Wipro's performance overall, they were disappointed with the revenue guidance for the June quarter.

Manik Taneja, analyst with Emkay Global, said, "Wipro's June '14 quarter revenue guidance is a tad disappointing and will mean that Wipro's revenue growth trajectory could suffer near term. Company indicates that while confidence on revenue growth trajectory improvement remains high, the June '14 quarter revenue guidance is weak on account of seasonality in India business and possible weakness in retail segment."

In the quarter, Wipro added 59 new clients during the quarter and the active clients rose to 986 from 968 in the third quarter.

On a geographical basis, Wipro outperformed its top three peers, Infosys, TCS and HCLT to report qoq growth of 2.7% for US, 4.1% for Europe, and 4.7% for India and Middle East. However, APAC and emerging markets de-grew 4.1% in the quarter.

Vertical-wise too, Wipro outperformed its peers, recording financial services growth of 3.9%, while healthcare and retail grew 3.1% and 1.7%, respectively. Telecom also grew 4.3% qoq, showing an improvement in this troubled vertical which contributes a large chunk to Wipro's revenues. The BPO business also grew 12.5% qoq. In comparison. Wipro's peers reported a slowdown in retail, telecom and BPO businesses in Q4. However, alike its peers, manufacturing declined 0.9% qoq.

Wipro's utilisation in the quarter also improved to 67% in the quarter, as compared with 66% in the last quarter. The company cut its employee base in the IT services segment, taking Q4 headcount to 146,053, as compared to 146,402 in Q3. Attrition for the quarter stood at 15.1%, as compared with 14.3% last quarter.

Ankita Somani of Angel Broking said, "For the current quarter, the management has given a dollar revenue guidance of $1,715-1,755 million, which translates into a revenue growth range of (0.5) -2% as against expectations of 1.5-3%. Wipro has recovered strongly from lower levels after posting better than expected results in the last two quarters but we believe it will still lag other larger peers such as TCS and HCL Tech in terms of revenue growth rates in this fiscal. "

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