Wipro Q4FY19 preview: Analysts see dip in margins; modest rise in PAT

Wipro will deliver its March 2018 quarter earnings on Tuesday. Analysts expect the company to report 1-1.5 per cent quarter-on-quarter (QoQ) growth in revenues in constant currency (CC) terms, in line with the company's 0-2 per cent guidance for the quarter. 

Since the past six months (October 2018 onwards till date), Wipro has outperformed the markets by rallying 16.6 per cent as compared to 6.5 per cent rise in the Nifty50 and 0.5 per cent gain in the Nifty IT index, ACE Equity data show. Only NIIT Technologies with a gain over 18.3 per cent has performed better than Wipro among the Nifty IT index constituents during this period.

As regards net profit, ICICI Securities pegs Wipro's Q4 PAT at Rs 2,544.4 crore, translating into 1.4 per cent QoQ growth, while analysts at Nirmal Bang expect a 2 per cent QoQ growth in PAT at Rs 2,560 crore. Edelweiss sees Q4 PAT at Rs 2,449.4 crore, a 2.4 per cent QoQ jump.

In constant currency (CC) terms, ICICI Securities expects the company's revenues to grow 1.5 per cent QoQ, mainly led by continued momentum in BFSI and digital segment. "IT services' US dollar revenues may grow 1.6 per cent QoQ to $2,079 million. In rupee terms, consolidated revenues could be largerly flat QoQ to Rs 15,043 crore. Nirmal Bang expects 1.8 per cent revenue growth in USD terms owing to 30bps cross-currency tailwind," the brokerage said in its result preview note.

According to Edelweiss, Wipro may deliver CC growth near the midpoint of its guidance, i.e. 1 per cent QoQ. "22 basis points of currency tailwinds would take its USD revenue growth to 1.2 per cent," the brokerage firm said. 

EBIT MARGIN

Margins, however, are expected to dip by around 40 basis points (bps) QoQ with growth rates in BFSI, demand outlook for energy & utilities segment and commentary on large deal-wins being the key variables to monitor.

Analysts at ICICI Securities expect Wipro to report 40 bps QoQ dip in margin to 19.4 per cent from a high base of 19.8 per cent in the previous sequential quarter (Q3FY19). 

Edelweiss, on the other hand, expects the adjusted EBITDA margin to settle at 21.8 per cent owing to rupee appreciation. "Adjusted EBITDA margin is expected to inch down to 21.8% from 21.9% owing to INR appreciation. Premium pricing of its digital products and operational efficiencies are expected to partially offset the impact." its note said.

GUIDANCE

As for guidance, Nirmal Bang expects Wipro to give guidance of 0-2 per cent revenue growth in CC QoQ terms for 1QFY20. "Typically, 1Q is a weak quarter for Wipro on QoQ basis because of its geographic mix," the brokerage firm said.

Other tier-1 IT companies such as Tata Consultancy Services (TCS) and Infosys have already announced their March quarter results.