Analysts expect 30% net profit rise from Wipro

Wipro shares gained around 5 per cent after the TCS Q1FY15 results on 17 June 2014 (See: TCS Q1 net vaults nearly 27% to Rs5,058 crore).

Analysts are expecting Y-o-Y revenue growth of around 17 per cent and over 30 per cent rise in net profit on the back of a 250bps rise in operating margin at the results due on Thursday. The quarter-on-quarter revenue and net profit is expected to be marginally down or up 2-4 per cent. 

Wipro has given a revenue guidance of $1,715-1,755 million for Q1FY15, implying a growth of (-)0.3 to 2 per cent quarter-on-quarter. However, Motilal Oswal analysts expect a revenue growth of 1.5 per cent and a 10bps rise in margin quarter-on-quarter. Its analysts have assumed 2 per cent appreciation in realised-rupee rates for the company.

According to Nomura analysts the key catalyst for Wipro could be the translation of the recent strong deal flow announcements into revenue and its sustainability. Any margin impact of these large deals, some of which invovle people takeovers, will be keenly watched. A 3-5 quarter-on-quarter per cent dollar revenue growth guidance for Q2FY15 will likely be taken positively.

Centrum analysts expect Wipro to start matching industry growth after this quarter. Analysts think that with several sizeable deal wins recently (including Takeda Pharma and 7-Eleven), "traction is robust and there is a new sense of urgency in securing credentials before the window of opportunity closes in Europe and in Infrastructure Services".

Analyst at Bank of America Merrill Lynch India Equity strategy have indicated that Wipro is likely to provide a Q2FY15 revenue guidance of 2-4 per cent quarter-on-quarter, reasonably strong in the context of weak growth seen in the last two years.

Analysts at Emkay Global Financial Services expect the EBIT margins of Wipro's IT Services at 23.1 per cent, down by 140 bps quarter-on-quarter on account of partial hit from wage hikes, currency appreciation and visa expenses.

Profits are expected to decline by 4.6 per cent quarter-on-quarter on account of lower operating margins.

The key things to watch, according to analyst is revenue guidance for Q2FY15 along with commentary on deal ramp ups and outlook on demand from key verticals/geographies.

ANALYST ESTIMATES
Y-o-Y growth for Q1FY15
 
Revenue
EBITDA
Net profit
Bank of America
16.90
38.00
31.00
Edelweiss
17.36
30.97
27.81
ICICI
15.50
36.19
29.40
IDBI Capital
18.00
16.82
26.69
IIFL
15.35
NA
28.48
Kotak
16.36
35.54
32.63
Motilal Oswal
18.70
35.54
28.81
Prabhudas
19.66
33.00
32.24
Religare
17.30
23.00
25.20
SBICap
16.70
NA
32.59
Antiq
16.12
31.92
29.72
Emkay
15.87
36.21
30.98
Average
16.96
31.59
30.13