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Saturday, April 30, 2011

Stock Analysis Post Results - Wipro

Recently WIPRO announced their 4th quarter results. Checkout stock analysis to know what the latest numbers mean to you as an investor in WIPRO.

Wipro reported better than expected revenue but wasn't any better on operational front. Revenue for IT services is at US$1,400mn, up 4.2% Q-O-Q. However, EBIT margin for the IT services segment declined by 14bp Q-O-Q to 22.1%. Revenue guidance for IT services segment for 1Q FY2012 stands disappointing at US$1.394bn–1.422bn. Wipro is clearly lagging it's competitors like Infosys and TCS and is undergoing organizational restructuring so you may expect weaker volumes.

For 4Q FY2011, Wipro registered 6.0% Q-O-Q growth in revenue to Rs.8,302cr. Volume growth of the IT services segment came in tepid at 1.9% Q-O-Q. Revenue from IT products and consumer care and lightening segments grew by 2.3% and 19.1% yoy, respectively. Overall EBIT margin declined by 52bp qoq to 17.8% on the back of a decline in EBIT margin in all the three business segments. EBIT margin of the IT services, IT products and consumer care and lightening segments declined by 14bp, 99bp and 29bp qoq to 22.1%, 3.6% and 12.0%, respectively. PAT came in at Rs.1,375cr Q-O-Q, up 4.3% Q-O-Q.

Stock valuation
In FY2011, Wipro added incremental revenue of only US$830mn. Compare this to Infosys, TCS and Cognizant (in CY2010) who adding whopping US$1.23bn, US$1.83bn and US$1.31bn resply. The company guidance for revenue growth for 1Q FY2012 is with only 1.2% growth on the upper end.

Revenue CAGR for IT services will remain weak at 17.3% (dollar terms) over FY2011–13E vs. Infosys, TCS and HCL Tech with much higher rates of 23–24%. You may value the company at 17x FY2013E EPS of Rs.28.8. one may buy stocks of WIPRO for one year modest target of Rs. 490-500.

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