Wipro: Low On Revenues And Forecasts

Wipro’s shares have been trading lower by more than 10% today, after its recent results announcement, wherein Wipro disappointed the street by achieving flat revenue growth and forecasting a poor guidance.

In Q4FY13, sequential revenue growth for Wipro came in at the lower end of its guidance of USD 1585 million to USD 1625 million, at USD 1585.1 million. This signifies growth of 0.50%, when compared to revenues of USD 1577.2 million in Q3FY13. Its operating margin slipped to 20.2% in Q4FY13 from 20.8% in the previous quarter.

In terms of services, flattish growth was seen in all of the offerings of Wipro other than Technology Infrastructure Services and Consulting, which grew by 4% and 5.2% respectively. Application Development and Maintenance was under pressure as revenues from this line declined by 3.4% sequentially. In terms of geography, Americas, Europe, India & Middle East and APAC & Other Emerging Markets grew by 1%, -3.4%, 8% and 2.8% respectively.

Wipro has been struggling to grow and has not been showing any strong signs of recovery. Its deal pipeline doesn’t look very encouraging and the guidance seems to waive hopes of near-term revival. The company has estimated its Q1FY14 revenues to be in the range of USD 1575 million and USD 1610 million. This translates into growth of -0.64% and 1.57%, which is rather disappointing.

Wipro has been an underperformer since the last few quarters and the guidance for Q1FY14 makes that trend continual. This forecast will add pressure to perform in the later quarters of FY14, for which visibility remains low at the moment. We thus maintain our negative outlook on Wipro and retain our bias towards TCS and HCL Tech.