Wipro Q2FY14 Numbers Fail To Impress

IT major Wipro has announced its Q2FY14 result, in which its topline grew by 13% to Rs 10990 crore in Q2FY14 as against Rs 9733 crore in Q1FY14, and by 19% on a YoY basis. The bottomline of the company has gone up by 19% to Rs 1932 crore as compared to Rs 1623 crore in the previous quarter of the current fiscal.

On a quarterly basis, the expenses of the company moved up by 10% to Rs 8748 crore, while the financial costs rose by 33% to Rs 65 crore. Despite this, the EBITDA margin has climbed by 202 basis points to 22.78% in Q2FY14 as against 20.76% in the previous quarter. Its peers Infosys and TCS have registered significant EBITDA margin of 36% and 33% respectively in Q2FY14.

Wipro has various business verticals like Global Media & Telecom, Finance Solution, Manufacturing and Hitech, Healthcare Services, Retail and Transportation and Natural Resource and Utilities, where it saw growth of 4.9%, 2.3%, 2.1%, 5.5%, 1.1% and 1.9% respectively on a QoQ basis.

As regards its geographical spread, the company has witnessed 2.9% of growth on a quarterly basis in America, while Europe contributed about 2.3% to its growth. The growth contribution from India & Middle East and APAC and Other Emerging Markets was registered as -2.2% and 6.3% respectively on a QoQ basis.

The stock of the company is currently trading at Rs 491, with a TTM price-to-earnings ratio of 20x. Wipro registered satisfactory growth in Q2FY14 on both sequential and yearly basis, but was unable to impress its investors. Its peers like TCS and Infosys had posted remarkable numbers for Q2FY14. Moreover, the guidance for annual growth for the company is expected to be 6%-7%, whereas that of its peers is expected to be 9%-10%.  Considering the overall scenario, the stock of Wipro does not appear to be worth recommending.