Wipro Q2 preview: Analysts see 25-29% YoY revenue jump; Q3 guidance key

Brokerage Sharekhan pegs Wipro's September quarter revenue at Rs 19,444 crore over Rs 15,114.50 crore posted in the corresponding quarter a year ago

Analysts on Dalal Street are pencilling in an upbeat show by IT major Wipro for the second quarter of the financial year 2021-22 (Q2FY22), with revenue rise projections ranging between 25 per cent and 29 per cent on a year-on-year (YoY) basis. Revenue growth, they say, will be driven by the ramp-up of large deals along with contribution from Capco and Ampion acquisitions. The company is slated to post its numbers for the September 2021 quarter on Wednesday, along with its peer Infosys.

During the said quarter, shares of the company managed to outperform the markets, with a gain of 16 per cent as against a 13 per cent rise in the NSE Nifty. However, it lagged the IT pack that added 20 per cent during the period under review.

While many brokerages expect the company's net profit to rise in double-digits in Q2 on a yearly basis, they eye a decline quarter-on-quarter (QoQ) mainly due to contraction in operating margins that will take a hit on wake hikes and full quarter impact from the integration of Capco.

Here's a look at projections from top brokerages

Sharekhan

Brokerage Sharekhan pegs September quarter revenue at Rs 19,444 crore over Rs 15,114.50 crore posted in the corresponding quarter a year ago, implying 28.6 per cent jump on YoY basis. On a QoQ basis, the figure could expand by 6.5 per cent from Rs 18,252.4 crore reported in Q1FY22.

"We expect constant currency (CC) revenue growth of 7.2 per cent QoQ and cross-currency headwind of ~80 bps. Wipro had guided revenue growth to be at 5-7 per cent QoQ on CC terms in Q2FY2022. In USD terms, we expect revenue to grow by 6.4 per cent QoQ. Organic CC revenue growth is expected to be around 4 per cent, led by ramp-up of large deals won earlier," the brokerage said in a note. For Q3FY2022, the brokerage expects Wipro to provide revenue growth guidance of 2-4 per cent.

EBIT margin in IT services is expected to decline by 54 bps QoQ owing to full quarter impact of wage hike for senior employees, the rollout of wage revision for employees in junior and mid-levels effective from September 1, full quarter impact from the integration of Capco, and expected decline in utlisation, the brokerage added.

Consequently, it expects net profit to decline by 14 per cent QoQ to Rs 2,780 crore from Rs 3232.1 crore posted in the preceding quarter of FY22. On a YoY basis, net profit could rise by 12.8 per cent. The figure stood at Rs 2,465.6 crore at the end of same quarter in FY21.

HSBC

The global brokerage expects a whopping 18.9 per cent decline in September quarter net profit on a sequential basis at Rs 2,620.7 crore, while yearly, the figure could expand by 6.3 per cent as per its projections.

Revenues, it said, could be at the midpoint of guidance posted in Q1FY22. One-month revenue of Capco and possible revenues from Ampion acquisition could translate to 3.2 per cent organic QoQ CC growth, as per the brokerage. In rupee terms, it eyes revenue growth of 27.6 per cent YoY and 5.7 per cent QoQ at Rs 19,290.1 crore. It further expects a robust guidance for sequential revenue growth.

We estimate IT services margins will have contracted 120bps QoQ mainly owing to the impact of wage hikes, it said. It eyes Q2FY22 EBIT margin at 16 per cent compared with 17.2 per cent at the end of June 2021 quarter and 18.5 per cent at the end of September 2020 quarter.

ICICI Securities

This brokerage says that Wipro is expected to report 6 pe cent QoQ growth in revenues mainly led by organic growth of 4 per cent QoQ and the rest due to the acquisition of Capco. In rupee terms, overall revenues are expected to increase 4 per cent QoQ to Rs 18,913.7 crore while in YoY terms, the figure could grow 25.1 per cent.  

"EBIT margins in global IT services are expected to decline 90 bps QoQ, mainly due to subcontracting costs and due to Capco acquisition. Overall EBIT margins are expected to decline 70 bps QoQ 9.2 per cent. Consequently, PAT is expected to decline 2.1 per cent QoQ," analysts at ICICI Securities said.

The brokerage pegs Q2FY22 PAT at Rs 3,162.7 crore. Yearly, the figure is likely to expand by 28.3 per cent as per this brokerage's projection.

Deal wins, second wage hike, vertical commentary, commentary of client’s IT budget and revenue guidance will be key areas of investor interest, it said.

KR Choksey

The domestic brokerage eyes an 11.9 per cent YoY rise in Q2 net profit for Wipro at Rs 2,759.1 crore but sees a decline of 14.6 per cent QoQ at the same time. On the revenue front, it pegs the figure at 19,028.1 crore, up 25.9 per cent on a yearly basis and 4.2 per cent QoQ.

"USD revenue for the combined IT Services business is likely to rise 6.4 per cent QoQ in USD terms and 4.2 per cent QoQ in CC terms. EBIT margin is expected to decline by 61 bps QoQ on wage hike and Ampion acquisition which was partially offset by productivity, offshoring & automation," it said.