Wipro Ltd.’s revenue growth for Q2 FY24 at (2%) QoQ in constant currency terms came in at the lower end of the guidance given. It also delivered services Ebit margin of 16.1%, flat QoQ, which it said would be the operating number in the near term, though it would aspire for 100-150 bps higher number in the medium term.
While order inflow has been strong for the fourth consecutive quarter, it gave a muted guidance of (3.5) – (1.5%) QoQ CC growth for Q2 FY24. Lack of discretionary short-term deals and weakness in banking, financial services, and insurance, technology and telecom seem to be key problem areas. It held on to Ebit margin of ~16% as the likely number in H2 FY24, despite salary hikes starting December 01 2023 (delayed by one quarter).
Wipro will likely display U.S. dollar revenue decline of ~4.5% in FY24 which will be the weakest among its Indian peers. Its higher exposure to consulting (through Capco and Rizing) has likely been one of the factors. Also, while the large deal total contract value (greater than $30 million in size) numbers are quite strong on a YoY basis, we are not sure whether it is winning enough amount of net new TCV to drive growth. The TCV to revenue conversion has been a problem for the entire industry, but it seems to be a particularly acute one for Wipro.
We have revised our estimates downwards for FY24-FY26.
Our valuation is based on September 2025 earning per share while keeping our target price-to-earning multiple constant at 14 times (30% discount to Tata Consultancy Services Ltd.), leading to a target price of Rs 353. Bloomberg