Wipro Q1 Result Preview: Information technology (IT) major Wipro Limited is expected to report a single-digit drop in year-on-year (YoY) profit on a double-digit rise in sales. The growth for the quarter is expected to be soft due to seasonal headwinds and moderation in demand.
Key factors that investors will closely monitor are revenue and margin outlook for FY23, demand outlook amid macro headwinds, outlook on engineering research and development, vertical growth guidance, large deal wins or pipeline, margin trajectory given supply-side pressures, and commentary on any future M&A activities.
Profit After Tax/ Net Profit
The Bengaluru-based company is expected to report a consolidated PAT of Rs 2,900–3,000 crore for the quarter, with consolidated revenue in the range of Rs 21,300–21,700 crore, according to a report by Kotak Securities. The company clocked a PAT of Rs 3,232 crore during the same period last year on revenues of Rs 18,252 crore.
Kotak Institutional Securities also sees Wipro guiding for 2.5-4.5 per cent revenue growth for September quarter in CC terms. This includes 1.2 per cent contribution from Rizing acquisition, it said, while suggesting organic growth guidance of 1.5-3.5 per cent.
The IT major had guided for 1-3 per cent QoQ revenue growth in CC terms, excluding Rizing contribution.
As witnessed in the past few quarters, supply-side pressures continue to dent the margins of Indian IT companies and Wipro, too, will continue to feel the heat with the rise in wages and travel costs. A weaker Indian rupee, however, will likely cushion the impact on margins to a certain extent.
The earnings before interest and tax (EBIT) margins are likely to contract between 200-250 bps year on year and by 30-100 bps on-quarter.
EBIT margin of most IT service companies to decline sequentially, owing to higher retention costs, wage revision, visa costs, and rising travel expenses. Rupee depreciation is expected to offset headwinds partially, ShareKhan noted.
Brokerages expect the company to provide revenue guidance of 3-5 percent CC growth on a sequential basis including two months of Rizing acquisition.
“Expect Wipro to guide for 2.5-4.5 percent growth in CC on a sequential basis, which includes 1.2 percent contribution from Rizing acquisition, and we expect an organic growth guidance of 1.5-3.5 percent,” the Kotak Institutional Equities report said.
Motilal Oswal said that the growth in Q1FY23 should remain within the management’s guidance band provided in Q4FY22. It expects demand commentary to remain strong and sees margin will be impacted by wage hikes and continued investments in Q1FY23.
Constant currency revenue
Brokerages expect the company to achieve a constant currency (CC) revenue growth of between 1 and 2.5 per cent, which will be in keeping with the guidance provided during the previous quarter.
Cross-currency movements remain adverse, which may weigh on reported dollar revenue and margins, Emkay Global said.