Wipro Q3 preview: Net profit may rise up to 10% YoY; Q4FY21 guidance eyed

Wipro Q3 preview: Following hopes of a solid earnings performance by most IT companies in an otherwise weak quarter, analysts expect Wipro to post decent revenue growth, minimum-to-no impact on EBIT (earnings before interest and tax) margins and a 5-10 per cent year-on-year (YoY) jump in its net profit for the October-December quarter (Q3FY21).

India's third-largest IT company, in terms of workforce, is slated to post its Q3 results on Wednesday, January 12. Deal wins and pipeline commentary, updates on new strategy, outlook on healthcare and energy verticals, margin trajectory, payout trends and attrition rates are some of the key things that investors would watch out for. Besides, strategic commentary by the new CEO, Thierry Delaporte, and guidance for Q4FY21 would also be of key interest.

Prabhudas Lilladher sees Wipro's guidance for the fourth quarter of FY21 to be in the range of 2-4 per cent. This guidance does not include recent signing of a large deal with Metro, the brokerage clarified.

Shares of Wipro have rallied 23.18 per cent for the three months ending December 2020 as against a 21.55 per cent rise in Nifty IT index and 24.30 per cent jump in Nifty 50 during the same period. In the seven sessions in January, the stock has rallied 15.67 per cent. The shares hit a 52-week high of Rs 451 on the NSE earlier today.

Here's a look at what top brokerages are projecting for Wipro's Q3 numbers:

Phillip Capital

The brokerage expects dollar revenue growth of 3.1 per cent quarter-on-quarter (QoQ) at $2,053 million with a positive cross-currency impact of 60bps, implying a 2.5 per cent growth in revenue in constant currency (cc) terms. In rupee terms, the brokerage sees Q3FY21E revenue at Rs 15,506.7 crore, up 0.2 per cent YoY (2.6 per cent QoQ) as against Rs 15,470.5 crore posted in the corresponding quarter of FY20 and Rs 15,114.5 crore in the preceding quarter.

It expects PAT (profit after tax) to grow 9.8 per cent YoY (9.4 per cent QoQ) to Rs 2,696.9 crore from Rs 2,455.8 crore posted in the same quarter last year. In the September quarter of FY21, PAT stood at Rs 2,465.6 crore. The brokerage believes margins will likely remain flat QoQ at 18.8 per cent with one month impact of wage hikes to be offset by strong growth. "We expect Wipro to guide for 0-2 per cent QoQ CC revenue growth for Q4. Deal wins and pipeline commentary, updates on new strategy, outlook on healthcare and energy verticals are among key things to watch out for," the brokerage said in IT sector preview report.

Sharekhan

Brokerage Sharekhan expects cc revenue growth of 3.1 per cent QoQ and the cross-currency tailwind of 40 bps. In dollar terms, it sees revenue to grow by 3.5 per cent QoQ to $2,062 million. In rupee terms, revenue is likely to rise to Rs 15,710 crore, up 1.6 per cent YoY (3.7 per cent QoQ), led by the ramp-up of large deals and marginal revenue contribution from full quarter consolidation of an acquisition, the brokerage said.

EBIT margin in IT services is expected to decline 20 bps QoQ, owing to the one-month impact of wage hike for a selected band of employees (excluding senior-level employees), it said, adding that net profit during the quarter is expected to grow by 4.2 per cent QoQ and 4.6 per cent YoY to Rs 2,569 crore.

Elara Securities

Analysts at the brokerage see a 0.1 per cent YoY and 2.5 per cent QoQ revenue growth at Rs 15,492 crore, led by the ramp-up of large deals from Fortum, Thoughtspot and Openness. It expects cc revenue growth of 2.5 per cent QoQ and dollar revenue growth of 3 per cent. In YoY terms, dollar revenue growth is expected to fall 2 per cent to $2,053 million.

"Wage hike from December 1 for nearly 80 per cent of the employees and large deal transition cost are key EBIT margin headwinds. Progress on a new strategy, revenue growth guidance for Q4FY21, outlook on energy, BFSI and healthcare segments and payout trends are among key monitorables," the brokerage said in a report.

It sees EBIT margin for Q3FY21 at 19 per cent as against 18.5 per cent posted in the preceding quarter and 17.1 per cent in the same quarter last year.

Emkay Global

The brokerage sees 0.8 per cent YoY and 3.1 per cent QoQ jump in revenue at Rs 15,590 crore in the December quarter. "We expect 2.5 per cent QoQ CC revenue growth with 50 bps cross-currency tailwinds. IT Services' EBIT margins are likely to decline 30bps sequentially to 19 per cent due to promotions and salary hikes given to high performers," the brokerage said.

It pegs Q3 profit at Rs 25,778 crore, up 5 per cent YoY and 4.6 per cent QoQ.

The brokerage also expects 1-3 per cent revenue growth guidance for the fourth quarter of FY21. Besides that, it believes CY21 IT budget outlook; demand trends in key verticals like BFSI, Consumer, Manufacturing, Health; update on the new operating model; margin outlook; and deal intake and pipeline are among key things to watch out for.