1. business and industrial

Result Update
October 27, 2014
Current
Wide Range in Q3FY15 $-Rev Guidance Continue; Maintain
HOLD with TP of Rs.611
Previous
CMP : Rs.581
Rating : HOLD
Rating : HOLD
Target : Rs.611
Target : Rs.611
STOCK INFO
BSE
NSE
Bloomberg
Reuters
Sector
Equity Capital (Rs mn)
Face Value (Rs)
Mkt Cap (Rs mn)
52w H/L (Rs)
Avg Daily Vol (BSE+NSE)
Q2FY15 Results Highlights
Rs.mn
$‐Rev
Revenue
EBIT
PAT

Wipro Ltd (Wipro) Q2FY15 performance was mixed-bag; revenue and PAT
largely inline; EBIT below our estimates. IT services $-Revenue grew by 1.8%
Q/Q to $1,772 mn (INSPL est $1,787 mn) led by IT services (2.4% Q/Q),
partially offset by 3.4% Q/Q decline in BPO segment. Consolidated rupee
revenue went up 5.1% Q/Q to Rs.118 bn (v/s Rs.114 bn in Q1FY15) driven
by IT services (4.0% Q/Q) and Products (21.1% Q/Q) segments growth.
%

During the quarter, EBIT de-grew by 2.9% Q/Q to Rs.23.0 bn on account of
62.4% Q/Q decline in Products segment EBIT, partially offset by 0.1% Q/Q
rise in IT Services EBIT. During the quarter, IT services EBIT growth remained
muted due to two months impact of wage hike. IT Services EBIT margin
contracted 80 bps Q/Q to 22.0% (v/s 22.8% in Q1FY15). The consolidated
EBIT margin contracted 160 bps Q/Q to 19.5% (v/s 21.1% in Q1FY15).

Interest Charge/other income during the quarter stood at Rs. 989 mn/
Rs. 5109 mn (v/s Rs. 888 mn/Rs.4,239 mn in Q1FY15), respectively. The
company’s tax rate stood at 22.8% which led to tax outgo of Rs.6,199 mn
(v/s 5,942 mn in Q1FY15). During the quarter, Wipro reported net forex gain
of Rs.1323 mn (v/s Rs.52 mn in Q1FY15).

Net profit went down 0.9% Q/Q to Rs20.8 bn, which is in-line with INSPL
est. of Rs.20.8bn. Adjusting other income & forex, net profit went down
13.9% Q/Q to Rs14.4 bn (v/s Rs.16.7 bn in Q1FY15).
Source: Company Filings; IndiaNivesh Research
(as on Sep. 2014)
Institutions
Others, Incl Public
Promoters
13.6
12.9
73.4
Source: BSE
STOCK PERFORMANCE (%) 1m
WIPRO
1
SENSEX
-1
3m
5
5
12m
13
27
Source: Capitaline, IndiaNivesh Research
WIPRO v/s SENSEX
Sensex
Source: Capitaline, IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Mobile: +91 77383 93371, 99205 94087
Tel: +91 22 66188826
[email protected]
Tel: +91 22 66188836
[email protected]
IndiaNivesh Research
20/Oct/14
06/Oct/14
22/Sep/14
08/Sep/14
28/Jul/14
25/Aug/14
14/Jul/14
11/Aug/14
30/Jun/14
16/Jun/14
02/Jun/14
21/Apr/14
19/May/14
07/Apr/14
05/May/14
24/Mar/14
10/Mar/14
27/Jan/14
24/Feb/14
13/Jan/14
10/Feb/14
30/Dec/13
16/Dec/13
02/Dec/13
21/Oct/13
18/Nov/13
04/Nov/13
140
130
120
110
100
90
80
70
60
50
Amar Mourya
Research Analyst
Q2FY15 Q1FY15 Q2FY14 Q‐o‐Q % Y‐o‐Y % INSPL est Variance(%) Comments
1,772
1,740
1,631
1.8% 8.6%
1,787
-0.9% In-line
1,18,161 1,12,456 1,09,920
5.1% 7.5% 1,14,368
3.3% Above Est
23,062 23,771 22,422 -3.0% 2.9% 24,762
-6.9% Below Est
20,848 21,032 19,431 -0.9% 7.3% 20,815
0.2% In-line
507685
WIPRO
WPRO IN
WIPR.BO
IT-Software
4,915
2
1,435,515
621/465
2,087,773
SHAREHOLDING PATTERN
Wipro
Wipro Ltd. (Wipro)
Key Takeaways
In-line quarterly guidance range...
Wipro’s Q3FY15 $-revenue guidance of 2.1% to 4.0% Q/Q (to $1,808-1,842 mn) in
IT services remains in-line with our estimate range (of 2.5-4.0%). We like the
consistent uptake in $-revenue guidance (See Chart Below). However, 190 bps (v/s
190 bps in Q2FY14) gap between the guidance range signals no major improvement
in revenue visibility on year-over-year basis (See Chart Below). Even though
management sounded positive on future deal pipeline and expect significant
improvement in guidance number going-ahead on back of strong deal funnel. The
key reason of wide range in $-revenue guidance was uncertainty over uptake in
discretionary budget. The management expects positive momentum in Healthcare,
Retail, Insurance, and High-tech along with revival in application space. In our view,
Wipro is on right track and likely to meet industry leading growth over-medium-tolong-term. During the quarter, the company’s net headcount increased by 6,835
employees (v/s 1,399 employees in Q1FY15), led to total employee base of 1,54,287
(v/s 1,47,452 in Q1FY15).
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Result Update (contd...)
Chart: IT $-Rev Guidance Trend
Chart: Wide Range in Guidance Continues
Source: Company Filings; IndiaNivesh Research
Source: Company Filings; IndiaNivesh Research
Interim Results
In Rs millions
Sales
Q/Q Gr %
Cost of sales and services
As a % of sales
Q1
97,346
‐11.7%
2014
Q2
Q3
1,09,920
1,13,317
12.9%
3.1%
Q4
1,17,045
3.3%
2015
Q1
Q2
1,12,456
1,18,161
‐3.9%
5.1%
(64,715)
66.5%
(71,591)
65.1%
(73,256)
64.6%
(74,820)
63.9%
(72,107)
64.1%
(77,791)
65.8%
Selling and marketing expenses
As a % of sales
(6,860)
7.0%
(7,605)
6.9%
(7,759)
6.8%
(7,025)
6.0%
(7,557)
6.7%
(7,628)
6.5%
General and administration expenses
As a % of sales
(5,567)
5.7%
(5,686)
5.2%
(5,775)
5.1%
(6,510)
5.6%
(6,187)
5.5%
(6,605)
5.6%
20,204
20.8%
‐4.2%
25,038
22.8%
23.9%
26,527
23.4%
5.9%
28,690
24.5%
8.2%
26,605
23.7%
‐7.3%
26,137
22.1%
‐1.8%
(2,502)
2.6%
(2,616)
2.4%
(3,109)
2.7%
(2,880)
2.5%
(2,834)
2.5%
(3,075)
2.6%
17,702
18.2%
‐3.7%
22,422
20.4%
26.7%
23,418
20.7%
4.4%
25,810
22.1%
10.2%
23,771
21.1%
‐7.9%
23,062
19.5%
‐3.0%
2,866
2,866
2,866
3,117
3,351
4,120
20,568
25,288
26,284
28,927
27,122
27,182
EBITDA
EBITDA margin
Q/Q Gr %
Depreciation
As a % of sales
EBIT
EBIT Margin
Q/Q Gr %
Net financials & Other income
Earnings before Tax
Taxes
% of Profits
Mi nori ty Interes t
Pos t tax excepti onal s
Net Income
Net Margin
Q/Q Gr %
EPS - Diluted
(4,251)
20.7%
(5,754)
22.8%
(6,060)
23.1%
(6,536)
22.6%
(5,942)
21.9%
(6,199)
22.8%
(84)
(103)
-
(125)
-
(126)
-
(148)
-
(135)
-
16,233
16.7%
‐6.1%
19,431
17.7%
19.7%
20,099
17.7%
3.4%
22,265
19.0%
10.8%
21,032
18.7%
‐5.5%
20,848
17.6%
‐0.9%
6.60
7.90
8.17
9.05
8.55
8.47
Source: Company Filings; IndiaNivesh Research
Operating metrics update
Attrition in IT services inched-up to 16.5% (v/s 16.1% in Q1FY15 and 15.1% in
Q4FY14). Voluntary quarterly attrition trend largely remained flat at 16.9% v/s 17.0%
in Q1FY15 and 15.1% in Q4FY14. Despite this, utilization rate (incl trainees) went
up 70.0% v/s 68.7% in Q1FY15 and 67.7% in Q4FY14. The management expects
further uptick in the utilization rate going-ahead on aback of various available levers.
Revenue from fixed price project (FPP) increased to 53.1% v/s 52.1% in Q1FY15 and
51.3% in Q4FY14. The company’s offshore revenue went-up to 46.7% (v/s 45.7% in
IndiaNivesh Research
Wipro Ltd|Result Update
October 27, 2014 | 2
Result Update (contd...)
Q1FY15. Wipro’s investment on sales and marketing led to 50 new client wins. After
mining successfully to the top account, management is deploying resources to mine
the tail accounts.
Key Practices/Geography/Verticals Update
Key practices, geographies, and verticals performance during the quarter was mixed
bag. On sequential basis, Technology Infrastructure Services (+7.8% Q/Q), Analytics
(+3.6% Q/Q), Application (+3.2% Q/Q) delivered above company average revenue
growth. This was partially offset by de-growth in BPO (down 3.4%) and ADM (down
7.3%) on sequential basis. During the quarter, U.S. demonstrated +4.3% Q/Q growth
followed by India (+2.9% Q/Q), and Other Emerging Markets (+6.6% Q/Q), partially
offset by 4.4% Q/Q decline in Europe. The growth in Technology (+1.8% Q/Q), Manuf
& Health (+1.8% Q/Q) remained positive during the quarter. The acquisition of SAIC
started yielding result, delivered 6.9% Q/Q growth in Energy & Utility segment.
Retail and Transportation vertical grew by 1.1% Q/Q in Q2FY15.
Top & Non-Top accounts Update
Wipro’s revenue from top/top5 [contr. 3.5%/12.9% of overall revenue] accounts
de-grew by 3.7%/2.0% Q/Q (v/s +3.2%/+2.4% Q/Q for Infosys). However, Top-10
accounts grew by 0.4% Q/Q in Q2FY15. Additionally, its Non-Top10 accounts
delivered positive growth of 2.2% Q/Q. Despite, reduction in overlaps and prioritizing
investments as per client bucket the growth is not visible in all the key accounts.
T o p Clinte s P e rfo rma nce v/ s P e e rs
(Qo Q Gro wth % )
Info sys
W ip ro
T op 5
2.4
-2.0
T op 10
3.2
0.4
Non T op 10
3.2
2.2
H CLT
-0.2
-0.7
2.9
Source: Company Filings; IndiaNivesh Research
Outlook
Wipro’s management sounded positive on overall revenue outlook and expects
FY15 to be the better year than FY14. However, the same optimism has not been
reflected in Q3FY15 $- revenue guidance. The management expects revival in
discretionary budget, which could lead to in-line average industry performance
going-ahead. We maintain our FY15E/FY16E $-revenue growth estimates 9.8%/
12.6% with realization (INR/USD) assumption of 61/61 for FY15E/FY16E.
Valuations
At CMP of Rs.581, the stock is trading at P/E multiple of 18.4x FY15E and 16.8x
FY16E earnings estimate. Third quarter FY15 $-revenue guidance is in-line with our
estimate, but wide range bring bit of uncertainty on overall revenue outlook. Wipro’s
re-organization to reduce overlaps, improve deals flow, and deploy automation
initiatives delivered marginal improvement on revenue growth and EBITDA
expansion front. The uptake in discretionary budget and revival in global economy
could lead to outperformance going-ahead. We maintain HOLD with target price of
Rs.611 [valuing at 16.5x FY16e] on Wipro.
IndiaNivesh Research
Wipro Ltd|Result Update
October 27, 2014 | 3
Result Update (contd...)
Consolidated Financials
Income Statement
Balance Sheet
Y E March (Rs m)
Net sales
Y/Y Ch %
FY12
375,248
20.7
FY13
376,882
0.4
FY14
437,628
16.1
FY15e
490,894
12.2
FY16e
556,458
13.4
COGS
SG&A
EBITDA
Y/Y Ch %
EBITDA Margin %
253,044
48,062
74,142
13.2
19.8
250,752
46,245
79,885
7.7
21.2
295,488
52,786
89,354
11.9
20.4
373,239
11,575
106,080
18.7
21.6
419,768
13,505
123,185
16.1
22.1
Interest
Deprecaition
1,057
10,129
863
9,913
798
11,106
645
12,254
520
13,963
EBIT
62,956
69,109
77,450
93,181
108,702
16.8
18.3
17.7
19.0
19.5
EBIT Margin %
Y E March (Rs m)
Share Capital
Reserves & Surplus
Net Worth
Minority
Long-term loans
Others
Total Liabilities
FY12
4,917
280,397
285,314
849
58958
0
345,121
FY13
4,926
278,886
283,812
1171
63816
0
348,799
FY14
4,932
338,567
343,499
1387
51592
0
396,478
FY15e
4,932
391,530
396,462
1843
41592
0
439,897
FY16e
4,932
450,692
455,624
2360
31592
0
489,575
Gross Block
Less Depreciation
184,421
53,267
170,175
63,180
205,388
74,286
222,569
86,539
242,045
100,502
Net Block
131,154
106,995
131,102
136,029
141,543
0
0
0
0
0
6,694
51
6,324
6,324
6,324
Defered tax (net)
0
0
0
0
0
Others
0
0
0
0
0
332,684
364,878
Capital Work in Progress
Investments
6,461
9,487
12,631
13,231
11,738
Associate Income
PBT
333
69,750
0
78,596
0
90,081
0
106,412
0
120,441
Tax
13,763
16,912
19,818
24,475
28,906
Current Assets
19.7
21.5
22.0
23.0
24.0
Sundry Debtors
55,987
61,684
70,263
81,937
91,535
NM
10.2
13.9
16.6
11.7
Other Income
Effective tax rate %
Adjusted PAT
Y/Y Ch %
-257
-337
-386
-456
-516
55,730
61,347
69,877
81,481
91,019
14.9
16.3
16.0
16.6
16.4
5.2
10.1
13.9
16.6
11.7
Minority
Reported PAT (RPAT)
RPAT Margin %
Y/Y Ch %
Source:Company filings; IndiaNivesh Research
PBT
FY13
69,972
FY14
78,248
FY15e
93,826
FY16e
109,222
Depreciation
10,129
9,913
11,106
12,254
13,963
Others
372,430
134,491
426,597
152,454
Cash & Bank Balance
119627
154009
174758
156512
Inventories
10,662
3,263
2,293
2,883
3,244
Others
57,511
66,789
102,435
78,543
89,033
Current Liabilities
23,429
15,434
65,023
24,208
27,442
Provisions
Net Current Assets
67,451
207,273
75,497
241,753
40,803
259,052
50,678
297,543
57,447
341,709
Total assets
345,121
348,799
396,478
439,897
489,575
181866
FY16e
Y E March
FY12
FY13
FY14
FY15e
EPS (Rs)
22.7
24.9
28.4
33.1
36.9
Cash EPS (Rs)
26.8
29.0
32.9
38.0
42.6
-1,057
-863
-798
-645
-520
-22,721
1,134
73,790
-90,504
-15,090
BVPS
50,364
80,156
162,346
14,931
107,575
-13,763
5,179
-16,912
13,267
-19,818
-57,709
-24,475
46,998
-28,906
8,017
ROCE %
ROE %
Interest Exp
Cash Flow After Chg in WC
Tax
85,392
Key Ratios
FY12
64,013
Changes in Working Capital
108,623
Source:Company filings; IndiaNivesh Research
Cash Flow
Y E March (Rs m)
298,153
110,353
DPS (Rs)
7.0
8.2
9.5
11.6
12.9
116.2
18.2
115.4
19.8
139.6
19.5
160.9
21.2
184.9
22.2
ROIC %
19.5
11.2
21.6
11.8
20.3
11.8
20.6
12.0
20.0
12.1
EBITDA Margin %
19.8
21.2
20.4
21.6
22.1
Net Margin %
14.9
16.3
16.0
16.6
16.4
25.8x
23.5x
20.6x
17.7x
15.9x
Cash flow from ope.
41,780
76,511
84,819
37,454
86,686
Capital expenditure (net)
-28,537
-22,217
-41,486
-17,181
-19,476
Free Cash Flow
13,243
54,294
43,333
20,273
67,210
Other income
0
0
0
0
0
P/BV (x)
5.0x
5.1x
4.2x
3.6x
3.2x
Investments
0
0
0
0
0
P/CEPS (x)
21.9x
20.2x
17.8x
15.4x
13.8x
-28,537
-22,217
-41,486
-17,181
-19,476
EV/EBITDA (x)
17.8x
16.5x
14.8x
12.4x
10.7x
6,156
4,858
-12,224
-10,000
-10,000
Dividend Yield %
1.2
1.4
1.6
2.0
2.2
-17,145
-20,139
-23,273
-28,518
-31,857
m cap/sales (x)
3.8x
3.8x
3.3x
2.9x
2.6x
6950
-4,039
-47737
-63,018
12913
-22,584
0
-38,518
0
-41,857
net debt/equity (x)
-0.2x
-0.3x
-0.4x
-0.3x
-0.3x
net debt/ebitda (x)
-0.8x
-1.1x
-1.4x
-1.1x
-1.2x
100
Cash flow from invest.
Debt (Decrease) Increase
Dividend paid (incl tax)
Share Issue / Repurchase
Cash flow from Financing
PER (x)
9,204
-8,724
20,749
-18,246
25,353
Debtors (Days)
95
106
81
100
Cash at the begin. of the yr
110,423
162,733
154,009
174,758
156,512
Creditors (Days)
21
19
34
18
18
Cash at the end of the year
119,627
154,009
174,758
156,512
181,866
Cash Conversion Cycle (Days)
74
87
47
82
82
Net change in cash
Source:Company filings; IndiaNivesh Research
IndiaNivesh Research
Source:Company filings; IndiaNivesh Research
Wipro Ltd|Result Update
October 27, 2014 | 4
Result Update (contd...)
Other Operating Metrics
Other Key Metrics
Utilization rates (Inc trainees %)
Attrition Rate (%)
Net Employee Addition (No's)
New Customer Added (No's)
3Q2013
74.8
14.2
2336
50
Practices
Technology Infrastructure Services
Analytics and Information Management
Business Application Services
BPO
Product Engineering & Mobility
ADM
R&D Business
Consulting
Verticals (New)
Technology, Media &Tele & Health
Financial services
Manuf & Health
Retail & Transport
Energy&U
Geography
US
Europe
India and ME business
Other Emerging Markets
Top Customers
Top customer
Top 5
Top 10
Non Top 10
4Q2013
74.6
13.7
2907
52
1Q2014
73.3
13.2
1469
28
2Q2014
74.3
13.5
-65
45
3Q2014
74.3
14.3
-814
42
4Q2014
76.5
15.1
-349
59
$ Amount
As % of Rev
Q2FY15
QoQ
Change
YoY
Change
475
204
516
163
124
291
172
35
26.8
11.5
29.1
9.2
7.0
16.4
9.7
2.0
7.8
3.6
3.2
-3.4
1.8
-7.3
3.9
1.8
20.3
68.8
-0.9
16.2
0.0
-12.3
-0.6
-13.1
$ Amount
As % of Rev
Q2FY15
QoQ
Change
YoY
Change
445
461
322
246
298
25.1
26.0
18.2
13.9
16.8
1.8
-0.9
1.8
1.1
6.9
13.6
7.0
4.0
2.0
15.5
$ Amount
As % of Rev
Q2FY15
QoQ
Change
YoY
Change
903
492
163
195
51.0
27.8
9.2
11.0
4.3
-4.4
2.9
6.6
11.2
4.5
20.4
-0.4
As % of Rev
Q2FY15
3.5
12.9
21.5
78.5
QoQ
Change
-3.7
-2.0
0.4
2.2
YoY
Change
0.0
0.8
2.4
10.6
$ Amount
62
229
381
1,391
1Q2015
77.9
16.1
1399
35
2Q2015
79.4
16.5
6835
50
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Wipro Ltd|Result Update
October 27, 2014 | 5
Result Update (contd...)
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007.
Tel: (022) 66188800 / Fax: (022) 66188899
e-mail: [email protected] | Website: www.indianivesh.in
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