Wipro Q1 Results: Profit sinks 21% on higher employee related costs

Wipro Q1 results: Wipro reported 21% yearly fall in profits missing analyst estimates while margins also came under pressure for June-quarter, as higher employee-related costs pushed overall expenses.

Wipro Q2 highlights:

Wipro Q1 Profit decline: The consolidated profit after tax (PAT) went down by 20.93% year on year for the quarter ended June as compared to Rs 3,242.6 crore in the year-ago period. Sequentially also, the profit was down 16.96%.

Wipro Q1 Revenue rise: The company reported revenue in dollar terms, and it stood at $2.7 billion. IT Services segment revenue was at $2,735.5 million, a growth of 13.3% year on year. In constant currency terms, the company delivered revenue growth of 17.2%. 

Wipro earns 35.4% of its revenue from banking, financial services, and insurance, followed by 18.5% in consumer and 11.5% in health. It earned 62% of its revenue in USD.

Wipro Q1 Margins fall: IT services' operating margin for the quarter was 15%, a decrease of 200 basis points quarter-on-quarter. It was down 380 basis points year on year.

Wipro Q2 Outlook: The company expects quarter-on-quarter revenue growth of 3 to 5%. It expects the revenue from the IT Services business to be in the range of $2,817 million to $2,872 million for the September quarter.

Wipro Q1 Attrition and headcount: Company's attrition rate was 23.3% during the June quarter, marginally lower than 23.8% in the previous quarter and significantly higher than 15.5% in the same quarter last year. During the quarter, the net headcount addition was at 15,446 including more than 10,000 freshers.

Management commentary: “We have made significant investments in Wipro’s growth engine and are very pleased with the outcomes. Our order bookings grew 32 percent YoY in total contract value (TCV) terms, powered by large transformational deals, and our pipeline today is at an all-time high," said Thierry Delaporte, CEO and Managing Director, Wipro.

Wipro Q1 Results 2022 Brokerage Calls:

Jefferies: The brokerage firm has kept UNDERPERFORM rating on the stock with a target price of Rs 360 per share. The lower estimate is by 1-6% and expects Wipro to deliver a 6% EPS CAGR in FY22-25. The weak EPS growth is a high risk of cuts to consensus estimates.

Goldman Sachs: It has kept a SELL rating on the stock with a target price of Rs 374 per share. The broking house largely maintained a weak revenue growth outlook over FY22-25e and forecast an EBIT margin of 16%, while reducing FY23-26e EPS estimates by 3-5%.

Credit Suisse: It has kept the NEUTRAL call on the stock and cut the target price to Rs 415 per share from Rs 530. Credit Suisse cut FY23-25E EPS by 11-13% and believes Q2 growth guidance includes Rizing & Convergence acquisition impact of 1.3-1.5%.