Wipro – Q1FY22 first cut, ICICI Securities

Wipro reported heathy set of Q1FY22 numbers. The company’s IT services revenues increased 12.0% QoQ in Constant Currency (CC) terms above our estimate of 10.0% growth in CC terms. We believe the company’s organic growth was 6% vs our expectation of 4%. The growth in revenues was led by BFSI (up 22.4% QoQ mainly led by acquisition of Capco), E&U (up 11.1% QoQ), Communication (12.8% QoQ) and Consumer Business Unit (up 14.1% QoQ)). The IT service EBIT margin decreased 200 bps QoQ to 19.0% (vs our estimate of 19.6%) mainly led by wage hike and lower margins in Capco. On the overall basis the company’s EBIT margin decreased by 201 bps QoQ to 19.0%. Wipro guided that its Q2FY22E IT services revenues would be in the range of US$2,535 -2,583 million, which translates into 5.0%% to 7.0% QoQ growth. We believe guidance does not include announced acquisitions of Ampion.

Key highlights of the quarter were 1) The company has won 8 large deals resulting in TCV booked of over US$715 million 2) > US$100Mn account increased by 2 to 13 and >US$50 million increased by 2 to 42 3) The company has not declared dividend. 4) Net addition of 12,178 employees 5) The company’s offshore % decreased by 50 bps QoQ to 54% 6) Attrition increased by 3.4% to 15.5% 7) Issued a Bond offering of US$750 million with a 5 year tenor.

Q1FY22 Earnings Summary

• In constant currency, global IT services revenues grew 12.0% sequentially, above our estimate of 10.0% growth. US$ revenues grew 12.2% QoQ to $2,414 million (vs. our estimate of US$2,369 million)
• Consolidated revenues grew by 12.4% QoQ to Rs. 18,252 crore. IT services revenues grew 13.6% sequentially to Rs. 18,048 crore while volatile IT products division decreased by 38.1% QoQ to | 131.1 crore
• IT services EBIT margin declined 200 bps QoQ to 19.0% (including other operating income) and was below our estimate of 19.6%. We believe the margin decline was due to wage hikes and lower margins in CAPCO. On the overall basis the company’s EBIT margin decreased by 201 bps QoQ
• Reported PAT came in above our estimate at | 3,232 crore (vs. our estimate of | 2,852 crore) mainly due to lower than expected tax expenses
• Wipro guided that its Q2FY22E IT services revenues would be in the range of US$2,535-2,583 million, which translates into 5.0%% to 7.0% QoQ growth. We believe the guidance does not include announced acquisitions Ampion

We believe the company has reported robust organic revenue growth of 6% and has given strong guidance of 5-7% QoQ in Q2FY22E. This coupled with healthy deal wins prompt us to be positive on the stock. We would be revisiting our estimates and target price post the conference call.
CT Bureau