Result Flash - Wipro - 4QFY2011

Result Flash on Wipro for 4QFY2011.

 

Wipro reported its 4QFY2011 numbers which were slightly better than our expectations on revenue front but stood muted on operational front. The company reported IT services revenues at US $1,400mn (vs. our expectation of US $1,394mn), up 4.2% qoq. The volume growth for IT services was muted at 1.9% as onsite volume declined by 0.4% qoq while offshore volumes increased by 2.8% qoq. The company managed to garner better price points onsite and offshore with 1.8% and 1.2% qoq growth, respectively. In constant currency terms, revenues came in at US$1,391mn. In rupee terms the IT services revenue came in at `6,289cr (vs. our expectation of 6,258cr), a growth of 5.7% qoq. The overall consolidated revenues grew modestly by 6.0% qoq at `8,302cr (vs. our expectation of `8,190cr). The overall revenues were aided by 19.1% yoy growth in revenues of consumer care and lightening segment along with growth in IT services segment.

 

The overall EBIT margins declined by 52bp qoq to 17.8% (vs. our expectation of 19.3%) on the back of decline in EBIT margin in all the three business segments. The EBIT margin of IT services, IT products and Consumer care and lightening segment declined by  14bp, 100bp and 30bp qoq to 22.1%, 3.6% and 12.0%, respectively. In addition to this the company booked additional cost of `44.7cr in reconciling items as against `7.5cr in 3QFY2011. PAT came in at `1,375cr qoq, up 4.3% qoq.

 

4QFY2011: Result highlights (IFRS, consolidated):

 

 

(Rs cr)	4QFY11	4QFY11E	% Var	3QFY11	% chg (qoq)	4QFY10	% chg (yoy)
Net revenue	8,302	8,190	1.4	7,829	6.0	6,983	18.9
EBIT	1,479	1,583	(6.6)	1,435	3.0	1,336	10.6
EBIT margin (%)	17.8	19.3	(152)bp	18.3	(52)bp	19.1	(133)bp
PAT	1,375	1,433	(4.0)	1,319	4.3	1,209	13.8

 

Key highlights:

 

·         The net additions were decent at 2,894 employees taking the total employee base to 1,22,385.

 

·         The utilizations for Global IT inched up by 30bp qoq to 68.9%

 

·         Voluntary attritions (annualised) declined to 20.9% from 21.7% in 3QFY2011.

 

·         In constant currency terms, verticals like energy & utilities, retail & transportation, manufacturing, healthcare & services, technology and financial services grew by 7.4%, 4.9%, 3.9%, 2.7%, 1.9% and 1.4% qoq, respectively. The positive surprise came in from telecom vertical, which stood sluggish for all the tier-I IT companies, grew by whopping 9.0% qoq in constant currency terms for Wipro.

 

·         The IT products segment posted 2.3% yoy growth in revenues to `910.5cr, with EBIT margin at 3.6%, down 100bp qoq. 

 

·         Consumer care and lightening segment registered a strong growth of 19.1% yoy with revenues at `724.4crcr. EBIT margin of this segment stood at 12.0%, down 30bp qoq.

 

·         Client addition stood at robust at 68 (vs. 36 in 3QFY2011). Active client base of the company stood at 904 as against 880 in 3QFY2011.

 

·         The guidance for IT services for 1QFY2012 stands highly muted at US$1.394-1.422bn with merely 0.4-1.6% qoq growth.

 

The results were mixed bag and the guidance also looks muted considering the upbeat environment for IT spending. We wait for management's commentary on the outlook relating to client budgets and the internal restructuring going on. The stock is currently under review and we will be releasing a detailed result update shortly.