X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Wipro: Good bottomline performance - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Wipro: Good bottomline performance
Jan 16, 2015 | Updated on Jan 19, 2015

Wipro has announced its results for the third quarter of 2014-2015. The company has reported a 2.3% QoQ increase in sales and a 5.2% QoQ increase in net profits. Here is our analysis of the results.

Performance summary
  • Consolidated net sales increased by 2.3% QoQ during the quarter. The revenues increased 1.3% QoQ in US dollar terms.
  • Operating margin improved by 0.8% QoQ to 22.9% during the quarter as compared to 22.1% seen during 2QFY15. On an absolute basis, the operating profit increased by 5.9% QoQ in the quarter.
  • Net profits increased by 5.2% QoQ. The sequential rise in net profits was largely attributable to the operating performance.
  • The company has declared an interim dividend of Rs 5 per share to be paid out on 2nd Feb 2015.

Consolidated Financial Snapshot
(Rs m) 2QFY15 3QFY15 Change 9MFY14 9MFY15 Change
Gross revenues 118,160 120,851 2.3% 320,513 351,466 9.7%
Expenditure 92,023 93,170 1.2% 248,744 271,043 9.0%
Operating profit 26,137 27,681 5.9% 71,769 80,423 12.1%
Operating profit margin (%) 22.1% 22.9%   22.4% 22.9%  
Other income 5,109 5,035 -1.4% 10,585 14,383 35.9%
Finance expenses 989 810 -18.1% 2,049 2,687 31.1%
Depreciation 3,075 3,647 18.6% 8,226 9,556 16.2%
Profit before tax 27,182 28,259 4.0% 72,079 82,563 14.5%
Tax 6,199 6,228 0.5% 16,064 18,369 14.3%
Profit after tax 20,983 22,031 5.0% 56,015 64,194 14.6%
Minority interest 135 103 -23.7% 312 386 23.7%
Net profit 20,848 21,928 5.2% 55,703 63,808 14.6%
Net profit margin (%) 17.6% 18.1%   17.4% 18.2%  
No. of shares (m)           2,468.7  
Diluted earnings per share (Rs)*         34.9  
P/E ratio (x)*         16.8  
* On a trailing 12-months basis

What has driven the performance in 3QFY15?
  • In terms of verticals, service lines and geographies Wipro had a fairly decent quarter. The US and the Middle East regions led the way again. The IMS division continued to maintain good momentum. The Healthcare vertical delivered a stupendous performance in this quarter. On the flip side, the traditional ADM business was under pressure due to completion of a few large projects in the last quarter. The fall in crude prices has led to short term project delays in the Energy vertical.

    Business mix
    Revenue breakup for IT services (Rs m) 2QFY15 3QFY15 Change
    Based on geography
    US 60,262 62,117 3.1%
    Europe 32,848 33,355 1.5%
    India and Middle East 10,871 11,602 6.7%
    Rest of the world 14,179 13,777 -2.8%
    Based on service offerings
    Application Development and Maintenance 19,378 19,336 -0.2%
    Global Infrastructure Services 31,667 32,992 4.2%
    Business Application Services 34,385 34,926 1.6%
    Product Engineering  8,271  8,580 3.7%
    Advanced Technologies & Solutions 13,588 13,535 -0.4%
    BPO 10,871 11,481 5.6%
    Based on verticals
    Global Media & Telecom 16,424 16,677 1.5%
    Finance Solutions 30,722 31,059 1.1%
    Manufacturing & Hi-tech 21,505 22,116 2.8%
    Healthcare, Life Sciences & Services 13,234 14,140 6.8%
    Retail, Consumer goods & Transportation 16,424 17,040 3.7%
    Energy and Utilities 19,851 19,820 -0.2%

  • At the operating level, the margins saw an improvement sequentially as the effect of wage hikes of the last quarter were absent in this quarter. The management stated that margins will remain in a tight range going forward (excluding the cross currency impact).

  • At the net level, a sequentially lower tax rate and lower finance expenses compensated for sequentially higher depreciation and marginally lower other income. The bottomline grew by 5.2% QoQ.
What to expect?

At the current price of Rs 584.45, the stock is trading at a multiple of 16.8 times its trailing 12 month earnings.

Wipro's performance was fairly good in this quarter. In constant currency terms, the IT services revenue grew by 3.7% QoQ. The company signed 15 large deals in the quarter. The deal pipeline for the company remains healthy.

The company is facing client specific issues in the Energy and BFSI verticals. The management expects these issues to get resolved over the next few quarters.

Wipro continues to win larger deals in the digital space. This is positive for the long term prospects for the company.

The company continues to focus on automation to improve margins as the management invests in marketing efforts to win large deals. The employee utillisation (excluding trainees) was a good 78.8% in the quarter. This can be a driver for margins going forward.

We recommended Wipro in the November 2014 Stock Select report. We maintain our buy view on the stock. Our target price of Rs 750 remains unchanged.

We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also within your overall exposure to equities please ensure that you broadly follow our suggested asset allocation and that no single stock comprises more than 5% of your portfolio.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group.
BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.
DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.
GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.
DETAILS OF ASSOCIATES:
  1. Quantum Information Services Private Limited (QIS) having its registered office at 103, Regent Chambers, Nariman Point, Mumbai 400021 is registered under SEBI (Investment Advisers) Regulations, 2013 vide Registration No. INA000000680. QIS provides information on mutual funds and personal financial planning, financial markets in general, and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services through its website www.personalfn.com
  2. Agora Holdings (Cyprus) Limited having its registered office at Akropolis, 59-61, 3rd Floor, Office 301 Strovolos 2012 Nicosia Cyprus belongs to Agro group (Agora) which owns www.agora-inc.com and is one of the largest and most successful consumer newsletter publishers in the world.
  3. Common Sense Living Private Limited (CSL) owns www.commonsenseliving.co.in and is an initiative that provides straightforward lifestyle and wealth-building ideas from wealth coach Mark Ford. CSL is 100% subsidiary Company of Equitymaster.
DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Equitymaster has financial interest in the subject company.
  2. Equitymaster's Associates, Research Analyst or his/her relative have no financial interest in the subject company.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  4. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

WIPRO SHARE PRICE


Dec 12, 2017 03:33 PM

TRACK WIPRO

COMPARE WIPRO WITH

MARKET STATS