Wipro Q4 Results Review – Total Contract Trends Not Impressive: Systematix

Wipro’s fourth quarter sales remain weak, but within the expected range. The positive margin surprise came from cost rationalization. The company ended his 24th fiscal year with a year-on-year revenue decline of 3.8% against his 4.1% growth announced by Tata Consultancy Services Ltd and his 1.9% growth announced by Infosys in US dollar terms.

We expect the divergence between Wipro, TCS and Infosys to continue into FY25.

1. Compared to TCS, which is showing a positive trend, and Infosys, where TCV is performing well in large transactions, the trend in the total number of contracts continues to be weak.

2. It has high exposure to consulting business, which is a challenge (Accenture is also facing pressure in consulting business).

3. The company has recently experienced multiple leadership departures, including the departure of its CEO and chief growth officer.

Appointing an internal candidate as CEO can potentially provide some stability at the top (regional, vertical), as external candidates typically drive change by bringing in leaders from within the company. there is.

Certain positive trends were observed during this quarter.

1. Revenue growth for top clients/top 5 clients/top 10 clients (22% from top 10 clients) turned positive year-over-year and quarter-on-quarter after several quarters of decline.

2. The BFSI vertical market reported positive quarter-on-quarter growth after several quarters of decline (capco business here).

Concluding a growth recovery requires confidence in a sustained trend. We reiterate that the average annual growth rate in USD revenue from FY2023 to FY2026 is 1.6%.

However, in our view, margin expansion appears limited at this time given the high utilization rates and flat quarter-over-quarter declines.

The company achieved margin improvement of 50 bps from FY2023 to FY2026 (previously 140 bps). We maintain a hold on the stock with a revised target price of Rs 430 (previously Rs 440) based on 17 times FY26 earnings per share.

Revenue growth catching up with peers and margins expanding faster than expected are key upside risks to our expectations.

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