Arihant capital markets is bullish on Wipro and has recommended buy rating on the stock with a target price of Rs 495 in its November 01, 2011 research report.
“Wipro posted their Q2FY12 results which was slightly better than our expectation on the topline front. In USD terms, the company’s IT services revenue came at $1472.5mn-a growth of 4.6% QoQ, while in INR terms it grew by a whopping 6.6%, thus matching its peers in terms of revenue growth after a gap of more than a year. SAIC’s contribution to the topline was $46mn which was higher than expectation of $40mn. Wipro’s total revenue (including IT services) saw a growth of 6.2% QoQ at Rs.9094.5cr. Its volume growth was also robust at 6% (out of which 4.6% was organic) with onsite volume growth at 9% and offshore at 4.7%. We believe the strong onsite volume growth can be taken as an indication of start of a number of new projects and thus is positive for the company’s growth. The management insists that its organisational restructuring has started to settle down and yielding results.”
“The company’s IT services operating margins came down by 200 bps to 20% mainly because of the full impact of the salary hike that came into effect in the month of June. In addition, Q2 also had the full quarter impact of consolidation of the newly acquired SAIC’s revenue whose margins are comparatively lower. SAIC contributed $46mn to the topline—higher than the $40mn expected earlier. The impact on margin due to SAIC was ~0.5%. With utilisation already at a high of ~81% (ex-trainees) and a weak pricing environment, the company does not have many levers left to support margins except a better service mix with high end services like analytics already showing comparatively faster traction (7%+ growth in the last two quarters). A major positive in Q2FY12 was the lower attrition number of 18.5% (23.2% in Q1FY12) which has been a serious concern in the previous quarter. Pricing saw another quarterly decline with onsite and offshore pricing going down by 0.4% and 4.1%% QoQ respectively. The management attributed the sharp decline in offshore pricing to closure of some major Fixed priced projects (FPP). FPP declined by ~200bps to 45.2% during the quarter.”
“Wipro’s revenue guidance of $1500-1530mn for Q3FY12E which implies a growth of 2.0%-4.0% was on expected lines. The company didn’t give any separate guidance for SAIC. We consider the guidance as positive and believe that company with a new management structure in place is showing definite signs of settling down. The company also did well in adding 44 new clients in the quarter on the back of 49 clients added in the previous quarter. We consider Wipro’s Q2FY12 result to be an affirmation of the fact that the single CEO structure with a number of ‘mini-CEOs’ looking after specific business division with complete authority has started to work well for the company. We also see a higher level of confidence in the management’s body language than was witnessed in the previous quarter. We therefore maintain our “BUY” call on the stock with a target price of Rs.495 per share for Wipro based on a 20x PE multiple for its FY13E EPS of Rs.24.7 per share,” says Arihant capital markets research report.
....more info
“Wipro posted their Q2FY12 results which was slightly better than our expectation on the topline front. In USD terms, the company’s IT services revenue came at $1472.5mn-a growth of 4.6% QoQ, while in INR terms it grew by a whopping 6.6%, thus matching its peers in terms of revenue growth after a gap of more than a year. SAIC’s contribution to the topline was $46mn which was higher than expectation of $40mn. Wipro’s total revenue (including IT services) saw a growth of 6.2% QoQ at Rs.9094.5cr. Its volume growth was also robust at 6% (out of which 4.6% was organic) with onsite volume growth at 9% and offshore at 4.7%. We believe the strong onsite volume growth can be taken as an indication of start of a number of new projects and thus is positive for the company’s growth. The management insists that its organisational restructuring has started to settle down and yielding results.”
“The company’s IT services operating margins came down by 200 bps to 20% mainly because of the full impact of the salary hike that came into effect in the month of June. In addition, Q2 also had the full quarter impact of consolidation of the newly acquired SAIC’s revenue whose margins are comparatively lower. SAIC contributed $46mn to the topline—higher than the $40mn expected earlier. The impact on margin due to SAIC was ~0.5%. With utilisation already at a high of ~81% (ex-trainees) and a weak pricing environment, the company does not have many levers left to support margins except a better service mix with high end services like analytics already showing comparatively faster traction (7%+ growth in the last two quarters). A major positive in Q2FY12 was the lower attrition number of 18.5% (23.2% in Q1FY12) which has been a serious concern in the previous quarter. Pricing saw another quarterly decline with onsite and offshore pricing going down by 0.4% and 4.1%% QoQ respectively. The management attributed the sharp decline in offshore pricing to closure of some major Fixed priced projects (FPP). FPP declined by ~200bps to 45.2% during the quarter.”
“Wipro’s revenue guidance of $1500-1530mn for Q3FY12E which implies a growth of 2.0%-4.0% was on expected lines. The company didn’t give any separate guidance for SAIC. We consider the guidance as positive and believe that company with a new management structure in place is showing definite signs of settling down. The company also did well in adding 44 new clients in the quarter on the back of 49 clients added in the previous quarter. We consider Wipro’s Q2FY12 result to be an affirmation of the fact that the single CEO structure with a number of ‘mini-CEOs’ looking after specific business division with complete authority has started to work well for the company. We also see a higher level of confidence in the management’s body language than was witnessed in the previous quarter. We therefore maintain our “BUY” call on the stock with a target price of Rs.495 per share for Wipro based on a 20x PE multiple for its FY13E EPS of Rs.24.7 per share,” says Arihant capital markets research report.
....more info