Wipro Q3 preview: Revenue likely to post double-digit growth YoY, EBITDA seen flat. Key factors here | Mint
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Business News/ Companies / Company Results/  Wipro Q3 preview: Revenue likely to post double-digit growth YoY, EBITDA seen flat. Key factors here
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Wipro Q3 preview: Revenue likely to post double-digit growth YoY, EBITDA seen flat. Key factors here

During Q2FY23, Wipro posted a consolidated net profit of ₹2,659 crore in Q2FY23 down by 9.27% yoy but higher by 3.72% qoq. Meanwhile, its consolidated revenue came in at ₹22,540 crore higher by 14.6% yoy.

Among key factors to look out for in Q3 will be revenue guidance, management commentary, attrition, pricing, and others. (Bloomberg)Premium
Among key factors to look out for in Q3 will be revenue guidance, management commentary, attrition, pricing, and others. (Bloomberg)

Wipro's Q3 financial result is the next major thing to watch in the IT sector. The Azim Premji-backed company will be announcing its December 2022 quarterly result today (January 13), and its stock will be in focus accordingly. In Q3FY23, Wipro's EBIT margins are expected to expand, however, wage hike shocks still pertain which is likely to limit the upside. On the other hand, the company is expected to continue its deal momentum. Among key factors to look out for will be revenue guidance, management commentary, attrition, pricing, and others.

Ahead of Q3 earnings, Wipro share price closed flat with a positive bias at 394.45 apiece on January 12 compared to the previous day's closing of 393.95 apiece.

The stock ranged from the day's high and low of 397.70 apiece and 390.50 apiece respectively.

Wipro's market valuation is over 2.16 lakh crore as of January 12, 2023.

During Q2FY23, Wipro posted a consolidated net profit of 2,659 crore in Q2FY23 down by 9.27% yoy but higher by 3.72% qoq. Meanwhile, its consolidated revenue came in at 22,540 crore higher by 14.6% yoy.

In Q2, Wipro's IT services segment revenues were at $2,797.7 million, an increase of 8.4% yoy. Also, non-GAAP constant currency IT Services segment revenue increased by 4.1% qoq and 12.9% yoy. Notably, Wipro's IT services operating margin for the quarter stood at 15.1% expanding by 16 basis points sequentially.

Also read: Infosys exceeds expectations in Q3. How the stock may react to quarterly prints?

What to expect from Wipro's Q3?

In its preview report for Q3FY23, ICICI Direct on Wipro said, "The company had given 0.5-2% QoQ CC growth guidance for Q3. Due to the higher furlough impact this year, we bake in revenue growth at the lower end. The company is expected to report 1% QoQ CC revenue growth in Q3 while dollar revenue growth is expected to be 0.7% QoQ, after factoring in 30 bps cross currency headwinds."

The brokerage expects the company's consulting business (led by Capco) is expected to continue to witness headwinds in Q3 while some verticals like retail, hi-tech, and manufacturing are likely facing headwinds during the quarter.

It added, "Some revenues for the quarter could also be impacted by certain leadership changes during the quarter in our view. Rupee revenue is expected to grow 3.6% QoQ to be aided by rupee depreciation."

Also read: HCL Tech beats the Street. Will the stock see the cheer?

On EBIT margins, ICICI Direct expects the company's IT services EBIT margins to expand moderately by 10 bps QoQ as there would some wage hike impact to hit in Q3 with tailwinds being moderation of attrition, pyramid optimisation, and rupee depreciation.

ICICI Direct expects Wipro's revenue to be at 23,403.8 crore up by 14.5% YoY and 3.3% QoQ, while PAT to be at 2,789.6 crore down by 9.7% YoY but up by 5.7% QoQ. EBITDA is factored at 4,278.1 crore marginally down by 0.6% YoY but up by 5.8% QoQ.

Meanwhile, Emkay Global expect Wipro to post 0.6% QoQ USD revenue growth in the IT services segment after factoring in 40bps cross-currency headwinds. Wipro had guided revenue growth to be 0.5% to 2% QoQ in CC terms.

Emkay's note further said, "We expect EBIT margin of IT services to expand by 40bps sequentially on account of operational efficiencies, employee pyramid rationalisation, and rupee depreciation, negating the full quarter impact of the salary hike."

Among key things to watch for in Wipro's Q3 results as per Emkay are:

- Q4FY23 outlook – Emkay expects 1-3% revenue growth guidance

- CY23 IT budget

- Management commentary on demand trends in key verticals like BFSI, consumer, manufacturing, healthcare, and E&U. Further, commentary on margin outlook, pricing environment, and attrition is among key monitorable. Also, views on deal intake/pipeline and any change in deal pipeline composition in terms of cost takeout versus discretionary/transformational projects. And, any delay/deferment/cancellation of projects due to macro uncertainties, high inflation, and lastly supply chain disruptions.

Emkay has recommended buying Wipro shares with a target price of 470 apiece. While ICICI Direct has suggested a 'Hold' on Wipro for a target price of 420.

Wipro's peers Infosys, TCS and HCL Tech have already announced their Q3 earnings.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 12 Jan 2023, 09:06 PM IST
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