Q1FY24 Review: Wipro: Discretionary cuts not abating yet

14 Jul 2023 , 10:14 AM

Wipro (WPRO) reported Q1FY24 revenue decline of 2.3% cc sequentially (adjusted for ISRE), in line with IIFL estimates, due to broad based weakness across verticals. At 16%, IT services EBIT margins were down 30 basis points sequentially and broadly in line with IIFL estimates. Deal wins for the quarter were muted with a TCV of USD3.7 billion (+3% cc YoY), even as large deal TCV was at USD1.2 billion (+9% cc YoY). WPRO guided for Q2 revenue growth of -2% to +1% cc sequentially, below IIFL estimates of 0-2%, which management indicated, is a reflection of macro challenges and cut in discretionary spend. WPRO continues to face heightened challenges in revenue growth versus peers. 

Analysts at IIFL Capital Services now expect them to show marginal revenue decline in FY24. They have reduced their FY24-26 EPS estimates by up to 3% while their 12-month Target Price is reduced to Rs. 360, pegged at 14x 2YF EPS. WPRO trades at 15x FY25 estimated P/E, at 15% discount to large-cap peers – justifiable on relatively weaker growth profile, believe analysts at IIFL Capital Services.

Key upside risks includes pick up in IT spend.