Wipro Q1FY23 net profit likely to drop 8.1% YoY, say analysts

Wipro Q1 preview: Wipro is expected to report revenue growth between of around 3 per cent quarter-on-quarter (QoQ) at Rs 21,733 crore for the quarter ended June 2022 (Q1-FY23) as against Rs 20,860 crore reported in Q4-FY22. The company is scheduled to announce its financial performance for the recently concluded quarter on Wednesday, July 20.

After TCS and HCL Technologies that reported multi-year high levels of attrition in Q1FY23, analysts expect a similar trend for Wipro as well. Analysts peg EBIT margin to contract in the range of 30 to 40 basis points QoQ (bps) to 15 per cent from 16.8 per cent. Net profit, too, is expected to decline 3.8 per cent QoQ and 8.1 per cent year-on-year (YoY) to Rs 2,970 crore.

At the bourses, shares of Wipro have tumbled over 43 per cent so far in calendar year 2022. In comparison, Nifty50 and the S&P BSE Sensex have tanked 8 per cent each.

Factors to watch out for

Investors will closely monitor revenue and margin outlook for FY23, demand outlook amid macro headwinds, outlook on engineering research and development, vertical growth guidance, large deal wins or pipeline, margin trajectory given supply-side pressures, and commentary on any future M&A activities.

Here’s what top brokerages expect from Wipro’s Q1FY23 numbers:

Phillip Capital: The brokerage house expects Wipro to report 2.3 per cent revenue growth in CC terms at Rs 21,532 crore in Q1. However, they expect margin to decline by 150 bps QoQ due to salary hikes, supply side pressures, and travel costs. That apart, PAT is also expected to decline 3.6 per cent QoQ to Rs 5,479 crore.

IIFL Securities: Analysts peg the IT services revenue to grow 2.8 per cent QoQ to Rs 21,509 crore in cc terms QoQ, as strength in BFSI and consumer verticals would offset softness in manufacturing and health. However, increased travel and facility costs are expected to depreciate margin by 40 bps QoQ to 15.9 per cent from 16.3 per cent. Net income, meanwhile, is likely to decline too by 3.9 per cent QoQ to Rs 2,965 crore from Rs 3,087 crore.

Motilal Oswal: The brokerage firm anticipates Wipro’s growth in Q1 to remain in-line with the management’s guidance in Q4FY22. The company had guided for revenue growth in the range of 1 per cent to 3 per cent in Q1FY23. Likewise, analysts pencil 2.2 per cent revenue growth QoQ and 16.8 per cent YoY to Rs 21,300 crore. That said, they too expect wage hikes and continued investments to hamper margin in Q1FY23. EBIT margin is expected to contract to 15.8 per cent from 16.8 per cent, sequentially.

BNP Paribas: Analysts expect the IT major’s revenue services to grow 2.7 per cent QoQ in cc terms to Rs 21,422 crore. However, they model 50 bps QoQ contraction in EBIT margin to 16.5 per cent as the company faces supply-side challenges. Despite that, analysts expect Wipro to guide revenue growth of 1 to 3 per cent for the second quarter in FY23 (Q2FY23).

Sharekhan: Expects revenue growth of 3.6 per cent QoQ and 16.9 per cent YoY to Rs 21,733 crore. In dollar terms, revenue is expected to grow 3.3 per cent QoQ to $2,762 million. Analysts expect the growth to be driven by higher spends on digital transformations and incremental revenue contribution from Rizing’s acquisition. Meanwhile, hiring and travel expenses are likely to dent EBIT margin by 49 bps QoQ to 16.5 per cent. Net profit, too, is expected to drop 3.8 per cent QoQ and 8.1 per cent YoY to Rs 2,970 crore.