Wipro Q1 results above estimates

• Profit beats estimates: Wipro, India's fourth-largest software services exporter, has reported a 2.8% on-quarter rise in net profit to ₹2,411 crore in Q1FY21, beating analyst estimates. Analysts had earlier estimated a profit of about ₹2,070 crore.
• Revenue falls: While profit has expanded, Wipro’s revenues dropped across all verticals, except Technology. Total revenue fell 5.3% over the previous quarter to Rs 14,922 crore. Revenue from IT services fell 7.3% to $1,922 million. The table below shows the revenues across verticals for Wipro.

• Operational margins improve: Wipro’s operational margins showed an improvement in the quarter, led by a favourable exchange rate movements and a steep decline in employee costs. Operating profit rose 1.3% to Rs 2,573 crore. IT services margin expanded to 19% from 16.1% earlier. 

Wipro has seen four chief executives in the last decade and has lagged its peers in growth. It lost its third position to HCL Technologies in the previous fiscal year. The New CEO Theirry Delaporte took charge from July 6th, with the main agenda of delivering profitable growth. Given the circumstances in Q1, Wipro has reported better-than-anticipated numbers.

Wipro has said that the conditions caused by the Covid-19 pandemic could decrease technology spending in the near future. Therefore, full-fledged recovery could be a few quarters away.

In the long-run, Wipro is confident of delivering sustainable growth. The stock has gained about 42% from its 52-week low on March 19th. The shares are trading at a PE of 15 as compared to the sector PE of about 21 times. 

Our VGQM model has a BUY rating on the stock.