MOSL: WIPRO (Neutral)-Marginal revenue miss-In-line margins-Guidance for a soft start to FY20
WIPRO: Marginal revenue miss; In-line margins; Guidance for a soft start to FY20
(WPRO IN, Mkt Cap USD24.4b, CMP INR281, TP INR280, Neutral)
- Marginal revenue miss, buyback ensures strong payout: WPRO grew its FY19 revenue by 5.4% YoY CC, improving gradually through the year and exiting 4Q with 6.9% YoY growth. IT Services EBIT margin expanded 180bp YoY to 17.9%, exiting the year at 19.0% (in line). Net income grew 12.4% to INR90b in FY19 from INR80.1b in the last fiscal. The announcement of INR105b worth of share buyback, combined with INR1/share of interim dividend, pegs its total payout at ~124% of net income. 4QFY19 QoQ CC revenue growth of 1% was at the midpoint of WPRO’s guided band of 0-2%, and marginally below our estimate of 1.5%. Net income declined 2.4% QoQ to INR24.9b (in line) in the quarter.
- Guides for soft start to FY20 but a better year: For 1QFY20, WPRO guided for revenue growth between -1% and +1% QoQ CC (5.5%-7.6% YoY CC), excluding revenue from Workday and Cornerstone Solutions. The key reasons behind the same are: [1] typical 1Q seasonality, which also includes productivity benefits which get passed on to customers in legacy run-the-business contracts and [2] completion of some Digital projects, with some gap in commencement of new ones, attributed to BFS clients. While BFS may not keep up with the pace of FY19 growth, WPRO cited that the order book, coupled with the improvement in Communications and Technology segments, will help drive better overall growth in FY20 compared to FY19.
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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