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  • 21 Jul 2022
  • ICICIdirect Research

WIPRO’S REPORTED WEAK MARGIN IN Q1 ; OUTLOOK REMAINS ROBUST

WIPRO - 569 Change: 5.60 (0.99 %)

News: In constant currency, global IT services revenues grew 2.1% sequentially while dollar revenue was up 0.5% QoQ to US$ 2,735.5 mn ,indicating cross currency headwinds of 160bps in Q1. Consolidated revenues grew by 3.0% QoQ to Rs 21,285 crore. EBIT margins for IT services were down by 200bps QoQ on i) (-130 bps) impact due to lower utilisation, higher subcontractor costs and some internal investments in technology while impact of Rizing acquisition was (-20 bps). Vertical wise the CC growth was aided by BFSI/ Consumer/Communication which was up by 2.4%/5%/9.2% QoQ while Health/Manufacturing/ Energy were laggards at +0.5%/-1.5%/-1% QoQ respectively. Geography wise, US/Europe/APAC reported CC QoQ growth of 2.6%/1.2%/2.2% respectively. The company’s net addition was 15,446 which includes 10,000 freshers in Q1FY23. Attrition was down 50bps QoQ to 23.3%. The company closed 18 large deals of US$1.1bn TCV in Q1FY23. It has guided for 3-5% QoQ growth in Q2FY23.

Views: The company’s large deal closure and strong net adds indicates strong revenue growth ahead. The company re-iterate that demand environment continue to be robust and there is no indication of tech spend cut from any of their clients so far as clients continue to spend on areas like cloud migration, cybersecurity, analytics etc . Attrition declined sequentially and it expects further moderation in the coming quarters. The company’s intent of more than double fresher addition in FY23 vs FY22 would help faster flattening of curve and would provide support for margin in the near to medium term. The company indicated few levers like  uptick in utilisation, moderation of subcontractor costs, pricing for margin improvement going forward. Despite annual wage hike cycle, it indicates margins will be in the upward trajectory in the coming quarters.

Impact: Positive