Wipro Q4 preview: Soft quarter likely; share buyback, Q1FY24 guidance eyed

Wipro Q4FY23 preview: As per an average of brokerage estimates, the company could report an average of Rs 23,586 crore of revenue, up 12-13.2 per cent year-on-year (YoY)

IT major Wipro is expected to report soft revenue growth for the March quarter (Q4FY23) due to slow down in revenue conversion, its exposure to impacted verticals and weakness in  the consulting segment, analysts say. 

As per an average of brokerage estimates, the company could report an average of Rs 23,586 crore of revenue, up 12-13.2 per cent year-on-year (YoY) when it releases its result on Thursday, April 27. 

Profit, meanwhile, could be around Rs 3,165 crore versus Rs 3,052.9 crore posted in the January quarter. 

The company’s Ebit margin is estimated to be between 16-16.7 per cent for the quarter. 

Kotak Institutional Equities said it expects the company to guide for a revenue decline of 1 per cent to a growth of 1 per cent for Q1FY24.

Key monitorables: Investors are keenly eyeing the company’s share buyback plan. Its growth guidance for Q1FY24, outlook for consulting business (Capco and Rizing), tech spending in BFS, positioning in cost take-out and vendor consolidation deals, commentary on margin levers, revenue conversion and demand environment will be closely watched. 

Here’s what brokerages expect: 

Jefferies: The brokerage expects Wipro to deliver a revenue growth of 0.5 per cent quarter-on-quarter (QoQ) in constant currency (cc) terms within its guided range of -0.6-1 per cent. Ebit margin could expand by 40 bps QoQ driven by higher utilization and currency benefit. It expects deal bookings to fall sequentially from a higher base last quarter, but these will be in the $ 600-700 mn range supported by larger cost takeout deals. Wipro's 1QFY24 guidance would serve as an indicator of near term outlook. 

Kotak Institutional Equities: The brokerage has baked in a likely cut in BFS tech spending in the near term, slowdown in discretionary spends and risks to growth through a 2-6 per cent cut in fair values for Mphasis and Wipro.

That apart, it expects Wipro to report a sequential revenue decline of 0.4 per cent in cc terms. Its exposure to impacted verticals such as hi-tech and consumer, slowdown in discretionary spending and higher exposure to consulting are the drivers of revenue decline, the brokerage said. 

It sees 10 bps decline in EBIT margin qoq to 16.2 per cent, while a reasonable TCV is estimated led by mid-size cost focus led deals. Though, annual contract value( ACV) would be under pressure, noting slowdown in discretionary programs.

PhillipCapital: The brokerage estimates the company’s IT services cc revenue to decline by 0.5 per cent QoQ and rise by 0.5 per cent in dollar terms. The revenue, it said will be impacted by slowdown in Hitech, Retail & CPG verticals and weakness in consulting business. It expects the company to guide for 0  to plus 2 per cent QoQ cc growth for Q1FY24.

Motilal Oswal Securities: Growth should remain soft and margins should remain flat compared to Q3FY23. Consulting segment will remain soft as clients continue to cut discretionary spending.

Sharekhan: The firm is projected to report a muted 0.2 per cent QoQ cc revenue growth with a likely 110 bps cross currency tailwind to result in a dollar revenue growth of 1.3 per cent QoQ. EBIT margins are expected to be flat.