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MOSL: MOrning India (18/July/19): 1. Wipro (Margin below estimate; 2Q revenue guidance tepid); 2. Mindtree; 3. MCX

MOrning India (18/July/19): 1. Wipro (Margin below estimate; 2Q revenue guidance tepid); 2. Mindtree; 3. MCX

 

Today’s top research idea

Wipro: Margin below estimate; 2Q revenue guidance tepid

• WPRO’s 1QFY20 CC revenue grew 5.9% YoY, IT Services EBIT margin expanded 120bp YoY (-60bp QoQ) to 18.4% and PAT grew 27% YoY to INR23.3b on a low base. On a QoQ basis, revenue declined 0.7% in CC (v/s our estimate of flat revenues QoQ), at the lower end of the company’s guided band of -1% to 1%.
• Wipro cited that it had a slower start to the year than anticipated. The quarter was impacted by completion of some large programs and deferral of some programs. For 2Q too, the guidance of 0-2% was below our earlier estimate of 2.3% QoQ CC. Miss on 1Q revenue and tepid 2Q guidance drove pruning of revenue estimates
• Management remains watchful on the macro. Banking in Europe, Capital markets globally and Manufacturing remain pockets of concern. We maintain our Neutral rating with a price target of INR270.

Piping hot news

Nielsen cuts FMCG growth forecast to 9-10%

Market research firm Nielsen has lowered its growth forecast for the fast-moving consumer goods (FMCG) sector to about 9-10% in 2019, from the earlier expectation of 11-12%, on the back of softening demand across all food and non-food categories. In a report released on Wednesday, Nielsen also noted that the impact of slowdown was seen more in rural areas than urban.