Wipro shares are expected to react neutrally after the company posted mixed results for the quarter ended September 30, 2022. Wipro’s top-line front beat analysts’ estimates, however, missed out on margins and profits in the form of a one-time cost impact. Wipro posted a consolidated net profit of 2,659 crore in Q2FY23, down 9.27% year-on-year but higher by 3.72% qoq. Meanwhile, its consolidated revenue came in 22,540 crores, an increase of 14.6% annually.
during the quarter, WiproIT Services segment revenue was $2,797.7 million, an 8.4% year-on-year increase. Additionally, non-GAAP stablecoins information technology services Segment revenue grew 4.1% qoq and 12.9% year over year. Notably, Wipro’s IT services operating margin stood at 15.1% for the quarter, expanding 16 basis points sequentially.
Wipro shares closed up 0.85% on BSE 407.75 each on Wednesday. The market cap of the company is approx. 2,23,672.96 crore.
Wipro ADRs dropped on the New York Stock Exchange after the second quarter results. At around 9:59 a.m. EDT, Wipro’s ADR (American Depository Receipts) is down 2.4% at $4.6350. The Wipro ADR had closed at $4.7500 on the previous day.
Should you invest in Wipro shares after Q2 results?
Emkay Global Financial expects Wipro shares to react “neutral” to the company’s Q2 earnings. During the quarter, Wipro reported mixed operating performance as one-time cost impacted overall margins and profit. That being said, Wipro’s revenue beats the estimates, however, the margin was a miss.
In its first cut note, Emkay said, “Wipro reported revenue of $2.8 billion, up 2.3%/8.4% QoQ/YoY (CC 4.1%/12.9% QoQ/YoY), well above our expectations of 3.7% CC QoQ. (TCS Q2FY23) Revenue was USD6.88bn, 4.1% CC QoQ. T Services EBITM expanded ~10bps sequentially to 15.1%, 20 bps below our estimate. (TCS IT Services EBITM ~90 bps QoQ to 24 increased by %. Adjusted Profit) 26.6 billion (3.7% QoQ, -9.3% YoY), versus our estimate of Rs 29.5 billion, on account of restructuring cost (~ 1.4 billion) and less other income.”
Wipro expects revenue from its IT services business to be in the range of $2,811 million to $2,853 million — translating into a sequential growth of 0.5% to 2% for the quarter ended December 31, 2022.
Further, Mitul Shah, Head of Research, Reliance Securities said, “Wipro reported average performance in 2QFY23, with IT Services EBIT margin coming in at 15.1%, which is broadly in line with our estimate of 15%, while net Earnings were 4.5% lower than our estimate.”
Shah said, “IT services revenue grew 2% QoQ / 8% YoY CC to USD 2.8 billion, in line with our estimate of $2.8 billion (consensus $2.7 billion). Sequential constant currency growth of 4.1% EBIT grew by 6% QoQ (down 2% YoY) versus our estimate of 3.8% 33.8 billion while EBIT margin was 15.1% (16bps QoQ / down 273bps YoY), 15bps higher than our estimate of 15%.
“Its net income stood at Rs 26.6 billion (4% QoQ / down 9% yoy), down 4.5% from our estimate of Rs 27.9 billion due to higher interest expense, while adjusted margin came in at 11.9% versus our estimate of 12.4. %,” said Shah.
On stock valuation and forward outlook, Shah said, “Wipro’s revenue and margins were broadly in line with our expectations. Its restructuring efforts, which include a simplified operating structure, steps in capacity up-gradation and talent management under the new leadership for Wipro in the medium term. However, supply challenge and wage hike will be the key challenge to maintain margins in the near term. TTM attrition is now at its peak. We currently have a Buy one on WPRO with 12-M target price Rating is Valuation Comfort at Rs 480.”
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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