Wipro, India's third largest software exporter, today reported a rise of 4% in consolidated net profit to Rs 21.88 billion for the quarter ended Jun. 30, 2015 compared to Rs 21.03 billion in the same period last year. Consolidated revenues for the current quarter stood at Rs 123.71 billion, up 10% from Rs 112.45 billion in June 2014 quarter.
IT services segment revenue went up 10% year-on-year basis to Rs 115.8 billion for June 2015 quarter. Meanwhile in dollar terms, IT services segment revenue was USD 1,794.1 million, up 1.1% from the previous quarter.
For second quarter of FY16, the company expects revenues from IT services business to be in the range of USD 1,821 million to USD 1,857 million.
Commenting on the result, Ashwin Mehta and Pinku Pappan, research analysts, Nomura, said, ''We continue to see weaker growth at WPRO versus peers, and the 1Q results and 2Q guidance do not provide any reason for us to change our stance. We also see IT services EBIT margins dropping by 170bps over FY15-17F as the company continues to focus on growth over margins. Given WPRO's weaker revenue and EPS growth, we believe a discount of 20-25% versus TCS on P/E valuation multiples is justified. We maintain our Neutral rating and prefer HCLT/CTSH/TCS and INFO over WPRO.''
Meanwhile, Sarabjit Kour Nangra, VP Research, IT, Angel Broking, said, ''Wipro posted a 1.1% qoq in USD IT Services revenues to end the period at USD 1,794.1 million V/s USD 1,775 million in 4QFY2015 and USD 1,770 million expected. The guidance for the 1QFY2016 was USD 1,765-1,793 million, a (0.5)-1% qoq growth. We maintain our BUY rating on the stock with a target price of Rs 753.''
Manik Taneja, research analyst, Emkay Global Financial Services, said, ''Inline June'15 quarter revenue performance, however IT Services margins declined by ~100 bps QoQ to 21% despite only partial headwinds from wage hikes and benefit from favorable realized rate drive miss on operating profits and profits. Sep'15 quarter guidance a tad light v/s expectations. Management expects H2FY16 to be better than H1FY16, however as we highlight below that this is similar to historical trends. Moderate FY16/17E EPS by ~3% each. Retain HOLD with an unchanged TP of Rs 600 on roll forward to June'16. While valuations are ‘inexpensive relative to peers', fair in our view given Wipro's struggle to catch up with peers continues.''
Rumit Dugar and Karan Taurani, Religare Capital Markets, Institutional Research, said, ''WPRO's Q1FY16 IT services revenues grew merely 1.1% QoQ to USD 1.79 billion while CC revenues were flat sequentially. Also, the 100bps QoQ contraction in IT services margins was higher than estimates. The Q2 USD revenue guidance of 1.5-3.5%QoQ is only a tad better than expectations. We note that WPRO's CC growth remains weaker than peers with no visible signs of market share gains. In absence of revenue upgrades, we see limited room for a re-rating. HOLD with a Sep'16 TP of Rs 630.''
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