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WIPRO :RESULTSREVIEW4QFY13
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Concallhighlights Volume growth for the quarter was driven by ramp
up
of
the
new
deal
wins.
Company
attributed
weak
pricing in the quarter to currency volatility and
changeinbusinessmix.
Managementindicatedthat1Qistraditionallyaweakquarter for Wipro due to softness in the India
business. Hence, the guidance for ITservices (0.6%
to 1.6% QoQ) factors in the same. Wipro hinted atacceleratedgrowthin2Qand3Q.
Rupeeappreciation impactedEBITmarginsforthe ITservices business negatively by 70bps in 4QFY13.
Forex hedges as at the end of the quarter stood at
US$2.1bn.
Infrastructure Management Services is presentingtremendous
growth
opportunities
in
the
IT
services
market. Wipros slower growth in IMS (relative to
peerset) is on account of India business, which has
beenregisteringweakness.
Wage hikes will be given as per schedule, effectiveJune2013.
Within BFSI, Retail banking growth remained strong,while
Investment
banking
was
weak.
Energy & Utilities and Manufacturing remainedrelativelyrobustduringthequarter.
QuarterlyFinancialsSnapshot(continuingoperations)(Rsmn) 4QFY13 4QFY12 YoY(%)
NetSales
96,078
84,547
13.6
Costofsalesandservices 67,008 59,140
Sellingandmarketingexpenses 6,183 4,838
Generalandadministrativeexpenses 5,820 5,263
OperatingProfits 17,067 15,306 11.5InterestCost 395 375
OtherIncome 3,077 2,448
FXGains/(Loss) 62 521
PBT 19,811 17,900
Tax
3,973
4,848
Profitattributedtocompany 15,838 13,052 12.4Source:Company,HDFCsecInstResearchMarginAnalysisEBITMargins(%) 4QFY13 3QFY13 QoQ(bps) 4QFY12 YoY(bps)ITServices 20.2 20.8 (64) 20.7 (54)ITProducts 2.5 2.4 10 4.7 (218)Source:Company,HDFCsecInstResearch
IT
services
revenues
at
USD1,585mn,up0.5%QoQ
andwasbelowourexpectation
ITServicesEBITmargins
contracted60bpsona
sequentialbasis
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WIPRO :RESULTSREVIEW4QFY13
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VolumeGrowth(QoQ) BillingRates(QoQ)
Source:Company,HDFCsecInstResearch Source:Company,HDFCsecInstResearch
GeographicmixGeography(%) Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 3QFY13 4QFY13Americas 53.9 53.0 51.7 52.5 52.1 51.6 51.5 49.9 50.1
Europe 28.0 28.6 28.8 28.2 27.7 28.1 28.2 29.6 28.5
India&MiddleEast 9.1 9.0 9.3 9.1 9.6 8.8 8.6 8.8 9.4
APAC
and
other
EmergingMarkets9.0 9.4 10.2
10.2 10.6 11.5 11.5 11.7 12.0
Source:Company,HDFCsecInstResearch
RevenuesbyGeographyGeographicGrowth(US$mn) Q4FY13 Q3FY13 QoQgrowth(%) Q4FY12 YoYgrowth(%)Americas 794.1 786.9 0.9 800.0 (0.7)Europe 451.7 466.8 (3.2) 425.4 6.2India&MiddleEast 149.0 138.8 7.4 147.4 1.1APAC
and
other
Emerging
markets
190.2
184.5 3.1 163.4 16.4
Source:Company,HDFCsecInstResearch
VerticalmixofrevenuesVerticals(%) Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13GlobalMediaandTelecom 17.2 16.8 15.7 15.4 14.9 14.9 14.4 14.3 13.8
Financesolutions 26.7 26.7 27.1 27.3 26.6 26.4 27.0 26.9 26.3
ManufacturingandHitech 19.7 19.7 19.0 19.0 19.1 19.4 19.0 18.7 19.3
HealthcareandLifeSciencesandServices 10.5 10.2 9.8 10.0 10.0 10.1 9.5 9.9 10.1
Retailand
Transportation
15.7 15.0
14.7 14.9 15.4 15 15.0 15.1 15.1
Energy&Utilities 10.2 11.6 13.7 13.4 14.0 14.2 15.1 15.1 15.4
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source:Company,HDFCsecInstResearch
Revenuegrowthwasdrivenby
India&MiddleEastandAPAC
andotheremergingmarkets.
Developedmarketsremainweak,
whichis
acause
for
concern
Volumegrowthcameat2.5%QoQ
(onsitevolumeup2.4%QoQ,
offshore
volume
up
2.5%
QoQ).
Managementindicated
thatrampinnewdealwinsdrove
volumegrowth
Globalmediaandtelecomvertical
remainedweak.Volatilevertical
performanceremainsacausefor
concern
6.6
1.51.9
1.8
6.0
1.80.8 0.8
0.2
1.0
2.5
2.0%
0.0%
2.0%
4.0%
6.0%8.0%
10.0%
Q
2FY11
Q
3FY11
Q
4FY11
Q
1FY12
Q
2FY12
Q
3FY12
Q
4FY12
Q
1FY13
Q
2FY13
Q
3FY13
Q
4FY13
Onsite Of fshore TotalVolumegrowth
0.1
3.0
0.8 0.6
1.2
2.40.7
1.7
1.2
3.8
2.8
6.0%
4.0%
2.0%
0.0%
2.0%4.0%
6.0%
2
QFY11
3
QFY11
4
QFY11
1
QFY12
2
QFY12
3
QFY12
4
QFY12
1
QFY13
2
QFY13
3
QFY13
4
QFY13
Onsite Offshore BlendedPricing
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WIPRO :RESULTSREVIEW4QFY13
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VerticalwiserevenuesVertical(US$mn) Q4FY13 Q3FY13 QoQgrowth(%) Q4FY12 YoYgrowth(%)
GlobalMediaandTelecom 218.7 225.5 (3.0) 228.8 (4.4)Finance
Solutions
416.9
424.2 (1.7) 408.5 2.1
ManufacturingandHitech 305.9 294.9 3.7 293.3 4.3HealthcareandLifeSciencesandServices 160.1 156.1 2.5 153.6 4.2RetailandTransportation 239.3 238.1 0.5 236.5 1.2EnergyandUtilities 244.1 238.1 2.5 215.0 13.5Source:Company,HDFCsecInstResearch
ServiceLines (%) Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13TechnologyInfrastructureServices 21.4 21.6 21.7 22.1 21.7 22.6 22.8 23.2 23.7 24.5
AnalyticsandInformationManagement 5.9 6.0 6.4 6.6 6.6 6.8 7.1 7.1 7.1 7.1
BusinessApplicationServices 29.8 29.7 30.4 30.5 30.8 30.6 30.7 30.7 31.4 31.4
BPO 9.3 9.8 9.3 8.8 8.5 8.2 8.4 8.7 8.8 8.8
ProductEngineering&Mobility 8.5 8.2 8.3 8.4 8.4 8.2 8.5 8.2 7.5 7.5
ADM 25.1 24.7 23.9 23.6 24.0 23.6 22.5 22.1 21.5 20.7
Source:Company,HDFCsecInstResearch
ClientmetricsClientDetails Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13Topcustomer 3.0% 3.1% 3.3% 3.7% 3.9% 3.5% 3.5% 3.5% 3.2% 3.6%
Topfivecustomers 10.7% 11.4% 10.9% 11.6% 11.8% 11.5% 12.2% 13.0% 13.2% 13.1%
Top10customers 19.2% 19.7% 19.4% 20.0% 19.9% 20.0% 20.9% 22.3% 22.4% 21.9%
>100mn 1 3 4 5 6 7 8 9 10 10
>75mn 10 12 12 13 14 16 14 16 16 16
>50mn 21 22 24 24 25 25 25 25 26 26
>20mn 64 68 69 70 73 75 73 71 73 76
>10
mn
113 117 118
120 121 121 131 133 132 133
>5mn 176 180 195 192 197 208 213 218 214 213
>3mn 254 255 258 267 284 292 302 293 293 291
>1mn 433 429 438 462 462 475 478 475 484 490
TotalNumberofCustomers 880 904 937 930 953 943 919 939 966 978
Numberofnewcustomers 36 68 49 44 39 41 37 53 50 52
Source:Company,HDFCsecInstResearch
TechnologyInfrastructure
servicesoutperformedonthe
servicelinefront
Revenuesfromtopclientinched
up13%QoQ. However,revenues
fromtop10clientsdeclinedby
1.7%QoQindicatingweaknessin
thetop210clients
Companyindicated
pruning
of
selecttailaccounts
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WIPRO :RESULTSREVIEW4QFY13
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Headcount Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13Total 119,491 122,385 126,490 131,730 136,734 135,920 138,552 140,569 142,905 145,812
Net
additions
3,591 2,894 4,105
5,240 5,004 (814) 2,632 2,017 2,336 2907
GlobalITservicesexclIFOX
Gross68.6% 68.9% 69.7% 69.3% 67.1% 67.4% 68.3% 66.8% 64.8% 64.9%
GlobalITserviceexeclIFOXNet 75.6% 76.1% 76.9% 76.1% 73.5% 74.1% 75.5% 73.7% 71.7% 71.7%
GlobalITservicesexeclIFOXNet
excludingtrainees79.9% 79.7% 81.0% 80.7% 77.5% 76.1% 77.9% 77.9% 74.8% 74.6%
AttritionsVoluntaryTTM 21.6% 22.7% 22.6% 21.1% 19.0% 17.5% 15.6% 14.6% 14.2% 13.7%
VoluntaryQuarterlyAnnualized 21.7% 20.9% 23.2% 18.5% 14.2% 14.4% 15.2% 14.4% 12.9% 12.5%
Involuntaryattrition
Annualized
2.2% 2.5% 2.0%
1.3% 1.6% 2.5% 3.2% 3.5% 4.0% 3.7%
Source:Company,HDFCsecInstResearch
PeervaluationsCMP
Mcap(Rsbn)
EPS P/E EV/EBIDTA ROE(%)FY12 FY13 FY14E FY15E FY12 FY13 FY14E FY15E FY12 FY13 FY14E FY15E FY12 FY13 FY14E FY15E
Infosys 2,281 1,310 145.6 164.9 166.3 176.9 15.8 13.9 13.8 13.0 10.3 9.3 8.5 7.9 27 26 22 21
TCS 1,456 2,855 53.2 70.5 79.4 90.5 27.4 20.7 18.7 16.5 19.2 15.3 13.1 11.4 39 42 39 37
Wipro 370 900 21.29 24.95 26.0 27.6 17.4 14.8 14.2 13.4 11.9 9.6 9.9 8.9 21.3 23.3 19.4 19.2
HCLTech 752 522 35.7 55.1 60.7 66.2 21.1 13.6 12.4 11.4 13.1 9.1 8.1 7.2 26 32 29 27
Source:Company,HDFCsecInstResearch
AssumptionsFY10 FY11 FY12 FY13 FY14E FY15E
CombinedIT
services
revenues
(USD
mn)
4,391 5,221 5,921 6,218 6,700 7,337
Growth(%) 18.9% 13.4% 5.0% 7.7% 9.5%
GlobalITservices 3259.3 3863.0 4442.0 4709.0 5071.6 5553.4
Growth(%) 18.5% 15.0% 6.0% 7.7% 9.5%
AverageExchangeRate 46.14 45.01 47.96 54.37 54.00 53.00
PBITMargin(%) ITservices 23.6% 22.7% 20.8% 20.7% 20.3% 20.1%
PBITMargin(%) ITproducts 4.6% 4.4% 4.4% 2.5% 2.8% 2.8%
EBITmargin Consolidated 17.7% 17.9% 17.63% 17.64%
Headcount(ITservices) 1,08,071 1,22,385 1,35,920 1,45,812 1,51,644 1,57,710
Source:Company,HDFCsecInstResearch
Net
additions
remained
steady
at
2,907employees.
Voluntaryattritionmoderated
whichisanencouragingsign.
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WIPRO :RESULTSREVIEW4QFY13
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Corebusiness(PostDemerger)(Rsmn) FY12 FY13 FY14E FY15EGrosssalesandservices 3,18,747 3,74,256 4,02,213 4,30,557
Growth(%) 17.4 7.4 7.0
Costofsalesandservices 2,25,794 2,60,665 2,81,839 3,02,511
Costofsalesandservices/Sales(%) 71% 70% 70% 70%
Sellingandmarketingexpenses 17,953.00 24,213.00 25,339.44 26,686.70
S&M/Sales 5.6% 6.5% 6.3% 6.2%
GeneralandAdministrativeexpenses 18,416 22,032 24,133 25,395
G&A/Sales 5.78% 5.89% 6.00% 5.90%
EBIT 56,584 67,346 70,902 75,964
EBITMargin(%) 17.75% 17.99% 17.63% 17.64%
Otherincome
8,982 11,317 12,400 12,400
Interest 3,371 2,693 2,400 2,400
ForeignExchangegain/(Losses) 3,328 2,626 1,200 1,200
Profit BeforeTaxation 65,523 78,596 82,102 87,164
PBTMargin(%) 20.6% 21.0% 20.4% 20.2%
ProvisionforTax 12,955 16,912 18,062 19,176
TaxRate 19.8% 21.5% 22.0% 22.0%
Profit toEquityholdersofthecompany 52,568 61,684 64,039 67,988
NPM(%)
16.5% 16.5% 15.9% 15.8%DilutedEPS(inRs.) 21.29 24.95 26 27.6
%GrowthinEPS 17.2% 4.2% 6.2%
Source:Company,HDFCsecInstResearch
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WIPRO :RESULTSREVIEW4QFY13
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CashFlow(Rsmn) FY11 FY12 FY13 FY14E* FY15E*PAT
from
Operations
53,321
55,987
66,696 64,039 67,988
Interest (5,684) (7,651) (9,417) (12,400) (12,400)
Depreciation 8,211 10,129 10,835 10,055 10,764
Others 15,260 17,198 17,565 18,062 19,176
WorkingCapitalChange (30,671) (35,587) (15,257) (39,323) (26,514)
OPERATINGCASHFLOW(a) 40,437 40,076 70,422 40,434 59,015Capex (12,221) (12,977) (10,616) (15,000) (15,000)
FreeCashFlow 28,216 27,099 59,806 25,434 44,015
Investments&Others (5,028) 4,921 (42,794) 12,400 12,400
INVESTINGCASHFLOW(b) (17,249) (8,056) (53,410) (2,600) (2,600)CapitalIssuance 25 22 9
DebtIssuance/(paid) (10,122) 712 11,394
Interest (696) (902) (1,044)
Dividend (15,585) (17,229) (17,080) (18,725) (19,880)
FINANCINGCASHFLOW(c) (26,378) (17,397) (6,721) (18,725) (19,880)NETCASHFLOW(a+b+c) (3,190) 14,623 10,291 19,109 36,535
Source:Company,HDFCsecInstResearch
*Demergeriseffective31March2013.HenceFY14andFY15financialsincludeonlyITservicesand
ITproductsbusiness
KeyRatiosFY11 FY12 FY13 FY14E* FY15E*
PROFITABILITY(%)GPM 34.1 32.0 33.6 32.4 32.2
EBITDAMargin 21.1 19.1 19.7 20.1 20.1
EBITMargin 18.4 16.3 16.8 17.6 17.6
APATMargin 17.1 15.0 15.4 15.8 15.7
RoE 24.3 21.2 23.3 19.5 19.3
RoCE 19.8 18.4 19.8 17.8 16.8
ROIC 31.6 28.8 32.8 31.9 31.0
EFFICIENCYTaxRate(%) 15.4 19.7 21.6 22.0 22.0
AssetTurnover 1.06 1.09 1.24 1.16 1.13
UnbilledRevenuesdays 22.5 28.3 29.2 27.1 26.3
Debtors(days) 72 79 82 72 72
Debt/EBIDTA 0.8 0.8 0.8 0.8 0.7
NetD/E (0.2) (0.2) (0.3) (0.3) (0.4)
VALUATIONEPS(Rs/sh) 21.6 22.7 27.0 26.0 27.6
CEPS(Rs/sh) 25.0 26.8 32.1 30.1 32.0
BV(Rs/sh) 97.8 116.3 115.7 133.8 153.3
DPS(Rs/sh) 5.4 5.7 6.8 6.5 6.9
P/E 17.1 16.3 13.7 14.2 13.4
P/BV 3.8 3.2 3.2 2.8 2.4
EV/EBITDA 13.0 11.9 9.6 9.9 8.8
EV/Revenues 2.7 2.3 1.9 2.0 1.8
DividendYield(%) 1.5% 1.5% 1.8% 1.8% 1.9%
FreeCashFlowYield(%) 3.1% 3.0% 6.7% 2.8% 4.9%
OCF/EV 4.8% 4.7% 8.6% 5.1% 7.7%
FCF/EV 3.3% 3.2% 7.3% 3.2% 5.8%
Source:Company,HDFCsecInstResearch
*Demergeriseffective31March2013.HenceFY14andFY15financialsincludeonlyITservices
andITproductsbusiness
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