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Business News/ Markets / Stock Markets/  Tech Mahindra, Wipro Q4 earnings: Should investors buy/sell these IT stocks?
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Tech Mahindra, Wipro Q4 earnings: Should investors buy/sell these IT stocks?

Stock prices of Tech Mahindra and Wipro will react to the Q4 earnings on Friday. Apart from results, other key factors to dictate these IT stocks performance would be Wipro's ₹12,000 crore buyback announcement and Tech Mahindra's final dividend for FY23.

The two IT giants have announced their quarter and year ended March 31, 2023 earnings. Premium
The two IT giants have announced their quarter and year ended March 31, 2023 earnings.

Two tech giants Tech Mahindra and Wipro have announced their fourth quarter earnings for FY23. Although Wipro's top-line YoY growth was in line with estimates, however, the FY24 guidance is below expectations. Wipro's net profit was broadly subdued in the quarter. Meanwhile, Tech Mahindra posted a weak quarter with double-digit decline PAT on rising expenses and reduction in clients spending. Both the companies stock will be in focus on Friday after the Q4 numbers. 

On Thursday, Wipro's stock price closed flat at 374.35 apiece on BSE. On the contrary, Tech Mahindra's share price climbed by 0.8% to end at 1,004.20 apiece.

Wipro:

In the March 2023 quarter, Wipro posted a consolidated net profit of 3,074.5 crore as against 3,087.3 crore a year ago same period and 3,052.9 crore in the preceding quarter.

Consolidated revenue from operations came in at 23,190.3 crore in Q4FY23, registering a growth of 11.2% YoY. IT services segment revenue stood at $2,823.0 million, an increase of 0.7% QoQ and 3.7% YoY. Non-GAAP constant currency IT Services segment revenue decreased by 0.6% QoQ but saw a surge of 6.5% YoY. Read here full report

In a meeting held on Thursday, Wipro's board of directors approved a buyback of 12,000 crore. 10 key highlights of the buyback offer here

Giving their view on Wipro's earnings and stock price outlook, Mitul Shah - Head of Research at Reliance Securities said, "Wipros' revenue was broadly in line with our expectations, while its guidance for 1QFY24 is much below expectation. Considering its restructuring efforts, which include simplified operating structure, step-up in capability upgrade and talent management under new leadership in the medium-term with TTM attrition decline supporting margin expansion, at present we have a BUY rating on WPRO."

However, Shah also added, "Based on weaker guidance and challenging business situation for the IT Service segment, we would revisit our estimates."

Tech Mahindra:

During the January-March quarter, Tech Mahindra posted a double-digit decline of 25.8% YoY and 13.8% QoQ in consolidated net profit to 1,117.7 crore. Consolidated EBITDA stood at 2,021 crore -- recording a drop of 5.7% QoQ, and 3.2% YoY. Revenue from operations came in at 13,718.2 crore up by 13.2% YoY but inched lower on a QoQ basis.

In dollar terms, revenue stood at $1,668 million flat QoQ but up 3.7% YoY. Revenue growth at 0.3% QoQ in constant currency terms.

The company has declared a final dividend of 32 per equity share for FY23.

Read here full Q4 earnings report:

Talking about Tech Mahindra's performance, Swapnil Shah, Director - Research at STOXBOX explained that as expected, Tech Mahindra registered a flattish sequential decline in its revenue growth. A decline in the annual revenue growth of the company’s Banking, Financials & Insurance vertical further reflected the heightened uncertainty caused by the recent banking crisis in the US and an overall weak IT spending outlook. Additionally, slower decision-making from clients was visible with both its operating numbers and new deal wins remaining under pressure.

Moving forward, the STOXBOX expert said, "We feel that the business environment for Tech Mahindra would remain challenging as cost optimization and operational efficiencies would be top priorities for clients in the near term amidst a weakening demand scenario."

In the case of the stock price, the Reliance Securities expert said, "TechM reported a subdued performance. Margins were below our estimates. However, subdued performance in technology and Retail verticals and key geography of America is concern. We expect margin pressure to build up over near term amid slowdown in America region. Though we expect an uptrend in technology spending to continue but industry will record single digit revenue growth, due to global slowdown and deferment on technology spending by few telecom players in US. We believe that higher exposure to Europe and CME vertical would pause a challenge for company ahead. Therefore, at present we have SELL rating on TechM."

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Published: 27 Apr 2023, 08:32 PM IST
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