For the quarter ended September 30, shares of Wipro have underperformed the market by falling around 15 per cent as compared to 2.67 per cent decline in the Nifty50 index. The Nifty IT index has shed 2.49 per cent during the same period, ACE Equity data shows.
Here's a quick look at what leading brokerages expect from September quarter results -
We forecast 1.3 per cent QoQ CC revenue growth (90 bps cross currency impact) and EBIT (earning before interest and tax) margin fall of 70 bps for IT services including India State Run Enterprise services segment business (ISRE), to 16.6 per cent owing to two months of wage impact and weak revenue momentum, partly offset by rupee depreciation. We expect Wipro to guide for 0-2 per cent revenue growth for 3Q.
Key to monitor: BFSI outlook, where growth is impacted by weakness in capital markets
and large EU banks, when we expect a healthcare to bottom and recovery in Consumer (impacted by project delays), progress on restructuring in India/Middle East (ME) and margin levers.
Motilal Oswal Financial Services (MOFSL)
Some delays in decision-making within BFSI would mean backended growth for FY20. Growth in BFSI is expected to be partially impacted by weak IT spendings by European banks. We expect Wipro to guide for 1-3 per cent QoQ CC growth for 3QFY20. We expect IT Services EBIT margin to be at 18.7 per cent, up 30bp QoQ; cost optimisation measures will be partially offset by two months of wage hike in 2QFY20. Our PAT estimate for the quarter is Rs 2,240 crore, -4 per cent QoQ and -2.1 per cent YoY, due to lower other income.
Expect Constant Currency (CC) revenue growth of 1.3 per cent and cross currency headwinds of 70 basis points (bps). We expect EBIT margin to decline due to wage hikes. We expect Wipro to guide revenue growth of 0 per cent - 2 per cent for Q3FY20E. Cautious commentary likely from management on US and Europe BFSI vertical. Investors should focus on sustainably of growth, commentary on Financial vertical, and margin guidance in the absence of revenue growth.
We expect Wipro to deliver CC growth of 1.9 per cent for Q2FY20, but cross-currency headwinds of 65bps imply USD revenue growth would be 1.2 per cent QoQ. Adjusted EBITDA margin is expected to expand 20bps as the impact of wage hikes is behind while a weak rupee, premium pricing and operational efficiencies should aid margin further. Demand outlook for E&U, commentary on large deal wins and guidance for digital revenue growth are the key aspects to monitor.
Revenue growth guidance for Q3FY20, which we expect to be in the range of 0-2 per cent QoQ in CC terms. Outlook on manufacturing, HealthPlan Services (HPS) and hi-tech segments, which are expected to see muted demand in the near-term. Timelines for completion of milestones on ISRE projects which should get the segment to atleast a break-even from -29.7 per cent EBIT margin in Q1FY20.