Wipro share price today: Sharekhan says that Wipro reported strong constant currency (CC) revenue growth (though in-line with expectations), while margins continued to beat estimates. Wipro delivered a third consecutive quarter of strong performance on sequential revenue growth, margin expansion, healthy order booking, and cash conversion. 

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In this report, Sharekhan says that Wipro delivered a third consecutive quarter of strong revenue growth, acceleration in order bookings, margin expansion, and solid operating cash flows. Management’s Q1FY2022 revenue growth guidance of 2%-4% qoq indicates its aggressive participation in strong demand and some success in the recent changes made by the CEO. Sequential revenue growth would translate into 11%-13% yoy growth in Q1FY2022, which would be the strongest yoy growth in the past several quarters. The company has closed 12 deals with TCVs of $1.4 billion and has signed total deal TCVs of $7.1 billion (up 33% yoy) in 2HFY2021.

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Sharekhan says that Wipro’s Management has been aggressively looking for ways to boost revenue growth with strategic acquisition, significant people changes, and external hires. Wipro is expected to deliver strong revenue growth of 14.8% in FY2022E with strong deal wins, healthy deal pipeline, and change in go-to-market strategy, higher spending on cloud and digital, and inorganic revenue contribution.

Sharekhan says on the margin front, Q1FY2022 margins would be impacted by wage hike to senior staff (effective from June 2021), ramp-up of large deals, investments in front-line capabilities, and skill-based premium. Further, the integration of Capco’s acquisition will dilute Wipro’s IT EBIT margin by 2% in 2022E. Sharekhan expects margin headwinds to be partially offset by strong revenue growth, higher offshoring revenue, work-from-home (WFH) efficiencies, and focus on cost synergies.
Sharekhan highlights key positives, negatives and risks of Wipro

Wipro’s Key positives:

Strong deal wins TCVs of $1.4 billion
Offshore revenue mix at 54.5%, highest ever in the last decade
Added one client in its $100 million revenue bracket on a qoq basis

Wipro’s Key negatives:

Revenue from APMEA declined by 6.3% yoy, given its exit of low-quality business in Middle East market Š
Attrition inched up to 12.1% in Q4FY2012 versus 11% in Q3FY2021

Wipro’s Key Risks:

Rupee appreciation and/or adverse cross-currency movements, longer duration of the pandemic; constraint in local talent supply in the US, and a stringent visa regime to adversely impact earnings.