wipro - 4qfy13 - hdfc sec

7/28/2019 Wipro - 4qfy13 - Hdfc Sec

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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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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


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


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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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


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


TechnologyInfrastructure

servicesoutperformedonthe

servicelinefront

Revenuesfromtopclientinched

up13%QoQ. However,revenues

fromtop10clientsdeclinedby

1.7%QoQindicatingweaknessin

thetop210clients

Companyindicated

pruning

of

selecttailaccounts


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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%


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


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


Net

additions

remained

steady

at

2,907employees.

Voluntaryattritionmoderated

whichisanencouragingsign.


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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%



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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


*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%


*Demergeriseffective31March2013.HenceFY14andFY15financialsincludeonlyITservices

andITproductsbusiness


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wipro - 4qfy13 - hdfc sec

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