Q4FY23 Review: Wipro: Deal conversion to revenues remains weak

28 Apr 2023 , 10:18 AM

Wipro (WPRO) reported Q4FY23 revenue decline of 0.6% cc QoQ, below estimates of IIFL Capital Services of flat cc QoQ, due to lower discretionary spend by clients. At 16.1%, EBIT margins were flat QoQ and broadly in line with IIFL/consensus expectation. Deal wins for the quarter were robust with a total TCV of USD4.1 billion (+29% cc YoY), driven by large deal win TCV of USD1.1 billion (+155% cc YoY). However, Wipro’s revenue conversion of deal wins has been weak over the last few quarters. 

Wipro guided for Q1 revenue growth of -3% to -1% cc QoQ, below IIFL Capital Services’ estimate of 0-2%, which management indicated, is a reflection of macro challenges and continued delay in decision-making. 

Wipro announced a share buyback of Rs120 billion by the way of a tender offer at Rs 445 (~20% premium to CMP) per share. Analysts at IIFL Capital Services have reduced their FY24/25 revenue estimates by up to 4% and model the share buyback, leading to -3%/+1% change to FY24/FY25 EPS estimates while their 12-month Target Price remains unchanged at Rs 370, pegged at 14x 2-year forward EPS.

Wipro trades at 14 times FY25 estimated P/E, at 17% discount to large-cap peers – justifiable on relatively weaker growth profile, believe analysts at IIFL Capital Services.