MOSL: WIPRO (Neutral)-Largely in line-lower ETR drives a beat in profitability
WIPRO: Largely in line; lower ETR drives a beat in profitability
(WPRO IN, Mkt Cap USD19.5b, CMP INR244, TP INR260, 7% Upside, Neutral)
- Operational performance largely in line: Revenue grew 3.8% YoY CC (our estimate: 4.1%) in 2QFY20. IT Services' EBIT margin expanded 310bp YoY to 18.1% (our estimate: 18.7%), while PAT rose 12% YoY to INR25.6b - a 14.4 % beat, mainly led by a lower-than-expected ETR (18.3% v/s our estimate of 22.5%). Sequentially, revenue was up 1.1% CC (our estimate: 1.3%; company guidance: 0%-2%), while the margin contracted 30bp led by lower utilization and the two-month impact of wage hike.
- Cautious outlook on BFSI: After remaining in double digit for around two years, WPRO's BFSI revenue growth decelerated sharply to 5.9% YoY CC owing to the completion of some large programs and the weakness in capital markets (in the US and Europe). Macro uncertainty translated into cautious commentary on this vertical. Apart from this, HPS in healthcare remained another pocket of concern and is built in the company's revenue growth guidance of 0.8%-2.8% QoQ for 3QFY20. Growth is likely to be led by communications in the US, a recovery in healthcare (outside of HPS) and manufacturing segments.
- Tepid momentum in top clients: Revenue from the top client declined 11.8% YoY, led by the non-renewal of projects and the delay in ramp-ups. Overall, the weak performance of the top BFS clients was offset by healthy spends from clients across other verticals.
Wipro is an information technology group based in India. Co. is engaged in the provision of information technology services. Co. is active as a global IT services company that provides a range of IT services, software solutions, IT consulting, business process outsourcing, or BPO, services and research and development services in the areas of hardware and software design to companies worldwide. Co. also provides outsourced research and development, infrastructure outsourcing and business consulting services. Co.operations are organized along two business segments: IT Services and IT Products.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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