WIPRO LTD. Result Update: Q3 FY 12

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1 WIPRO LTD. Result Update: Q3 FY 2 C.M.P: Rs Target Price: Rs Date: Feb. 02 nd 202 BUY Stock Data: Sector: IT Face Value Rs wk. High/Low (Rs.) 490.5/30.20 Volume (2 wk. Avg.) BSE Code Market Cap (Rs in mn) Share Holding Pattern As on Dec 5.74 Promoters FIIs 79.5 DIIs Others Year Comparative Graph Wipro Ltd. BSE SENSEX SYNOPSIS Wipro is 4 th largest Company in the world in terms of market capitalization in IT services. During the quarter ended, the robust growth of revenue is increased by 27.69% to Rs million. Wipro Technologies has launched its proprietary Wipro Marketing Mix Modeling (MMM) technology solution on Amazon Cloud. Wipro Technologies has launched 'Wipro SprintHR', used to deploy Oracle Fusion Human Capital Management. Wipro Technologies awarded with NASSCOM Award for Excellence in Diversity and Inclusion for Best IT Services and Product Companies. Wipro Technologies has launched 'FLoW' an Oracle-based Pricing, Supply Chain & Finance Management Solution for the retail sector. The Company s revenue and PAT are expected to grow at a CAGR of 7% and 3% over FY0 to FY3E respectively. Years Net sales EBITDA Net Profit EPS P/E FY FY 2E FY 3E

2 Peer Group Comparison Name of the company CMP (Rs.) Market Cap. (Rs. mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%) Wipro Ltd TCS Infosys HCL Tech Investment Highlights Q3 FY2 Results Update Wipro Ltd has posted a consolidated result for the quarter ended December 3, 20. During the quarter, the company has posted a net profit of Rs million for the quarter ended December 3, 20 as compared from Rs million for the quarter ended December 3, 20, rise of 0.43%. Net sales are surged by 27.69% to Rs million from Rs million same quarters last year. Company posted earnings of Rs a share during the quarter, registering 0.23% increment over prior year period. Quarterly Results - Consolidated (Rs. in mn) As At Dec- Dec-0 %change Net sales % PAT % Basic EPS % 2

3 Net Sales & PAT growth During the quarter, Net Sales rose by 27.69% to Rs million from Rs in the same the quarter last year and the Total Profit for quarter ended December 20 was Rs million grew by 0.43% from Rs million compared to same quarter last year. Value in Rs. mn Net Sales & PAT Q3 FY Q3 FY2 Net Sales PAT EPS Due to increase in equity capital the basic EPS of the company stood at Rs for the quarter ended Dec. 20 from Rs for the quarter ended Dec EPS Q3 FY Q3 FY2 EPS

4 Break up of Expenditure Segment Revenue Pariculars Q3 FY2 (Rs. mn) IT Services IT Products Consumer Care & Lighting Others Total

5 Wipro launches 'FLoW', a Technology Solution for the Retail Sector Wipro Technologies has launched, a Technology 'FLoW' an Oracle-based Pricing, Supply Chain and Finance Management Solution, for the retail sector. It will provide retail franchises and wholesalers greater data visibility needed for faster and more accurate trading transactions. This is a composite solution to the Oracle Retail Merchandising System (RMS), developed in line with result of customer feedback. Wipro launches Marketing Mix Modeling Solution on Amazon Cloud Wipro Technologies has announced the launch of its proprietary Wipro Marketing Mix Modeling (MMM) technology solution on Amazon Cloud. MMM helps in determining the marketing of ROI and impact on sales by statistically analyzing activities like price change, advertising, media delivery and promotions. Partners with VendorNet to provide retailers next gen omni-channel Wipro Technologies has entered into a strategic partnership with VendorNet to solve retailers' challenges when it comes to synchronizing channels and having a single cross-channel view of inventory. The collaboration involves the resale and integration of VendorNet Commerce Suite with Wipro's ENCORE e-commerce platform and will help retailers overcome organizational and cultural roadblocks inherent to the adoption of an omni-channel business model. The combined Wipro and VendorNet solutions will provide retailers with a true view of all their sales and fulfillment channels to enable a buy anywhere, anytime customer experience. Wipro launches Wipro SprintHR with Oracle Wipro Technologies has announced the launch of 'Wipro SprintHR', a cloud based technology offering used to deploy Oracle Fusion Human Capital Management. It is available as a SaaS model and is designed to help enable enterprise customers transform their HR processes. Leveraging its strong relationship with Oracle and codevelopment experience on Oracle Fusion Applications, Wipro SprintHR helps significantly reduce cost and deployment timelines. 5

6 Awarded NASSCOM Corporate Awards for Excellence Wipro Technologies was awarded the prestigious NASSCOM Award for Excellence in Diversity and Inclusion, in the category - Best IT Services & Product Companies. The awards recognizes that the "culture of inclusion" has become a business imperative and recognition of these awards are sought after by companies, to enhance their positioning amongst the most desirable employers in the country. Revenue Composition (Q3 FY2) Revenue Composition (%) 3% 5% Global Media & Telecom 5% Financial Solutions Manufacturing & Hitech 0% 28% Healthcare & Services Retail & Transportation 9% Energy & Utilities Geography Composition (Q3 FY2) 6

7 Service Line Distribution (Q3 FY2) Customer Concentration Customer Concentration 25.00% 20.00% 5.00% 0.00% 5.00% 0.00% Q4 FY Q FY2 Q2 FY2 Q3 FY2 Top Customer 3.0% 3.30% 3.70% 3.90% Top 5.40% 0.90%.60%.80% Top % 9.40% 20.00% 9.90% 7

8 Onsite/Offshore Revenue Value in mn Onsite/Offshore Revenue Mix ($mn) Q4 FY Q FY2 Q2 FY 2 Q3 FY 2 Onsite Offshore Head Count Head Count Q4 FY Q FY Q2 FY2 Q3 FY2 Headcount

9 Company Profile Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services Company globally. In the Asia Pacific and Middle East markets, Wipro provides IT solutions and services for global corporations. Wipro s ADSs are listed on the New York Stock Exchange, and its equity shares are listed in India on the Stock Exchange, Mumbai and the National Stock Exchange, among others. Wipro Ltd provides comprehensive information technology (IT) solutions and services, including systems integration, information systems outsourcing package implementation, software application development and maintenance, and research and development services to corporations globally through its IT services, solutions and products division. The following are the different verticals where Wipro is working: Aerospace, Defense & Satellite Automotive Electronics Automotive IT Broadband & Optical Networks Chemicals Computing Peripherals Computing Platforms Consumer Electronics Consumer Packaged Goods Distribution Energy Finance Health Science High Technology IP Multimedia Networks Industrial Automation Insurance Manufacturing Media & Entertainment Medical Devices Mobile Devices Retail Semiconductors Software Products Group Storage Technologies Telecom - Equipment Vendors Telecom - Service Providers Travel & Transportation Utilities Wireless Networks & Devices Alliances The company has alliance with the following companies: Actuate Amber Point Aprision Ariba ARM Artisan ATG Autonomy Axiom BEA Blue Titan Business Objects Cape Clear Cognos Cisco Computer Associates Data Flux Data Foundations DSPA Embedded Linux Consortium FileNet GXS HP Hyperion Subex UMC CEVA JDA Hyundai IBM Informatica Interwoven ITKO Magic Software Microsoft 9

10 Nortel Obilcore OM Partners Oracle PeopleSoft Real Time Image RSA SAS SAP Siebel Sun Tibco Vignette Web Methods Zafin Labs Sterling Commerce Getronics TSMC ATG Selectica Subsidiaries Wipro Infrastructure Engineering Ltd. Wipro Inc. C Mango Pte Ltd. Wipro Japan KK. Wipro Shanghai Ltd. Wipro Trade Marks Holding Limited. Wipro Travels Services Ltd. Wipro Consumer Care Ltd Wipro Cyprus Private Ltd. Quantech Global Services Ltd. Wipro Austrial Pty Ltd. 3D Networks Pte Ltd. Spectra mind Inc. Wipro Chandrika Ltd. Infocrossing Services The company services are divided into five. They are as follows:. IT services 2. Product Engineering Solutions 3. Technology Infrastructure Services 4. Business Process Outsourcing 5. Consulting Services Services IT Services Product Engineering Technology Infrastructure Services BPO Services Consulting Services 0

11 Financial Results 2 Months Ended Profit & Loss Account (Consolidated) Value (Rs.in.mn) FY0 FY FY2E FY3E Description 2m 2m 2m 2m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Deprecation Profit Before Tax Tax Profit After Tax Minority interest Share of Profit & Loss of Asso Net Profit Equity capital Reserves Face value EPS

12 Quarterly Ended Profit & Loss Account (Consolidated) Value (Rs.in.mn) 30-Jun- 30-Sep- 3-Dec- 3-Mar-2E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Minority interest Share of Profit & Loss of Asso Net Profit Equity capital Face value EPS

13 Key Ratios Particulars FY0 FY FY2E FY3E No. of Shares (in Million) EBITDA Margin (%) 23.49% 23.32% 22.09% 22.07% PBT Margin (%) 20.23% 20.06% 8.37% 8.44% PAT Margin (%) 6.8% 6.94% 4.83% 4.92% P/E Ratio (x) ROE (%) 22.88% 22.05% 9.5% 8.4% ROCE (%) 27.33% 27.68% 26.93% 25.83% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts: Net sales & PAT: 3

14 P/E Ratio(x): Debt Equity Ratio: 4

15 EV/EBITDA(x): P/BV: 5

16 Outlook and Conclusion At the current market price of Rs , the stock is trading at 8.08 x FY2E and 5.64 x FY3E respectively. Earning per share (EPS) of the company for the earnings for FY2E and FY3E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 7% and 3% over 200 to 203E respectively. On the basis of EV/EBITDA, the stock trades at 2.20 x for FY2E and 0.62 x for FY3E. Price to Book Value of the stock is expected to be at 3.48 x and 2.85 x respectively for FY2E and FY3E. We expect that the company will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. Industry Overview Over the past few years, the Indian information technology (IT) and IT enabled Services (ITeS) industry has been on a steady growth trajectory. The IT industry, alone, has played a pivotal role in placing India on the world map as a major knowledge-based economy and outsourcing hub. The major sub-segment, that entails Business Process Outsourcing (BPO), is re-inventing itself and experiencing a paradigm shift from being a volume-oriented proposition to a value-oriented proposition by expanding its scope of services and providing substantial high-end solutions in the areas of Data Analytics, Legal Process Outsourcing, etc. The number of internet users in India crossed the 00-million mark in September 20, growing 3 per cent over last year's figure of 87 million, according to the latest report of the Internet and Mobile Association of India (IAMAI) co-prepared with research firm IMRB. The study anticipates India's internet population to grow to 2 6

17 million by December 20. Further, the country's broadband subscriber base stood at 2.69 million in August 20, according to data released by the Telecom Regulatory Authority of India (TRAI). Competitive Landscape After personal computers (PCs) and laptops, tablets are mushrooming as a major competitive avenue wherein vendors are striving hard to launch more affordable devices for the Indian market. Second quarter of 20experienced the release of the ipad2 in India in less than 50 days after its US launch while Samsung is scouting for 40 per cent share of the Indian tablet market in 20. In the enterprise software segment, US giant Oracle claims to cater around 7,000 clients across the Indian government and private sectors; recent wins being Punjab National Bank (PNB) - India's second-largest public sector bank and Hindustan Petroleum Corporation (HPCL) - another Indian public sector organ. Meanwhile, Indian IT companies like Wipro, Infosys, TCS, HCL and Mahindra Satyam are developing their technologies to entail cloud computing applications and solutions for various segments ranging from financial services and banking to manufacturing. IT & ITeS - Key Developments and Investments Between April 2000 and August 20, the computer software and hardware sector received cumulative foreign direct investment (FDI) of US$ 0,787 million, according to the Department of Industrial Policy and Promotion (DIPP). Monster India has launched an online campus hiring initiative - 'Monster College' wherein it will collaborate with educational institutions across India and connect them with over 20,000 employers for campus placements. Investor Relations Global Rankings (IRGR), a New York-based organization, has ranked Technology giant Infosys as the country's best company for corporate governance practices, financial disclosure procedures, IR website and online annual report. There were more than 80 companies that registered themselves for the rankings. 7

18 Tower infrastructure company Indus Tower is looking for a partner to provide end-to-end IT solutions and Indian tech-biggies like Infosys, IBM and Wipro are in discussions with the former for the same. The contract, potentially in the range of Rs 2,430-2,96 crore (US$ 500-US$ 600 million), would involve areas such as infrastructure management, application development and other related managed services and would span for 8-0 years. Indus Tower, a joint venture firm between Bharti Group, Idea Cellular and Vodafone Essar, owns 0,000 towers and operates 6 out of the 22 telecom circles. Google, with its partner web hosting firm HostGator, has announced that it will offer free web domain names to small and medium businesses (SMBs) in India in order to boost internet usage in Asia's third largest economy. The company will maintain the websites for a year without any charges and at the end of the first year, users will be asked to pay a nominal fee if they wish to renew their domain name. India is shelter to around 8 million SMBs of which about 400,000 have a website and 00,000 have active online presence, said Google. Hence, the market poses a great potential for growth. Cloud Computing The Emerging Technology The model of cloud computing has attracted attention of organizations of all sizes as the technology offers lower operational costs, scalability and mobility at every level. Indian companies are increasingly adopting 'hybrid cloud' (a mix of private and public cloud) to address their concerns of data privacy as well. Indian businesses and government agencies are expected to create huge demand for guidance in the usage of cloud computing services. There are already more than 50 cloud computing service providers in the Indian market. Meanwhile, Indian internet services providers (ISPs) and data centre service providers including Bharti Airtel, Sify, Trimax, and NetMagic are investing applications and bandwidth to support new cloud service offerings. NTT Communications Corp plans to invest US$.58 billion in Europe and India over 20-5 to develop its cloud computing business at a faster pace while AWS, the world's largest cloud-based service provider, that forms about 2 percent of Amazon's 8

19 revenues, is projected to become the online retail giant's next most-profitable business in India. Soaring e-commerce The US$ 0 billion Indian e-commerce market is expanding exponentially (it grew 47 per cent in 20 to reach the present size) as rising internet penetration is making customers buy more and more stuff online. Investors are also betting high in the industry; they poured around US$ 200 million into Indian e-commerce start-ups in last couple of years. As a result of such growth, e-retailers, who want to focus on their core functionalities, are expected to outsource bulky back-end operations (such as customer care, order processing, invoice processing, finance and accounts et al) and emerge as a substantial source of revenue to BPOs. Retail brands are expected to bring a great transformation in online space. Women's apparel retail brand Biba and tyre brand Bridgestone have become available online recently. IAMAI expects online advertising to increase by per cent in 20-2 on back of increased internet usage by retailers. Government Initiatives The government of India is leaving no stone unturned to accelerate growth of IT & ITeS sector in the country. Earlier in 20, the ministry had revealed its intentions to launch e-governance initiatives that would facilitate rolling out mobile governance and electronic service delivery bill. Sufficient funds have also been earmarked to connect Indian villages and classrooms across the country with knowledge centres wherein the government aims to provide broadband connectivity to all the village panchayats by 202. Mr Sachin Pilot, Minister of State for Communications and IT believes that broadening connectivity in such a manner would improve the way government interacts with people. 9

20 Further, the Ministry of Communications and Information Technology has revealed its intentions to attract higher investments for IT sector in smaller cities and make software services sector grow more than three times to US$ 300 billion by The government also wants to increase the IT exports from US$ 59 billion currently to US$ 200 billion by The projections and focus areas were laid in a draft national policy which also stated that the government will endorse innovation, research and development (R&D) in advanced technologies and application development in areas such as cloud computing, mobile value-added services and social media. The policy also aimed at employing additional 0 million skilled people in the information communication technology sector. The sector currently has manpower strength of 2.5 million skilled people. IT & ITeS in India - Road Ahead The Indian market for IT products and services is expected to consolidate its growth achieved in 200 and increase from US$ 9.7 billion in 200 to US$ 4.2 billion by 205, according to India Information Technology Report for the third quarter of 20by Business Monitor International (BMI). BMI estimates that the Indian market for PCs (including notebooks and accessories) will be worth around US$ 8 billion in 20, higher from US$ 6.8 billion in 200 while it projects IT services market at around US$ 7.5 billion in 20 which would further swell to a size of US$ 6.9 billion by 205. The report has estimated a compounded annual growth rate (CAGR) of 8 per cent for Indian software market over the span of Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. 0 2

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