Wipro Q2 results preview: Profit may grow in double digits; Q3 revenue guidance likely to be muted

Wipro is likely to clock the weakest growth among large cap IT companies. The fourth-largest IT firm is seen reporting a double-digit rise in year-on-year (YoY) profit on a flattish sales growth. Margin is seen expanding on both sequential and yearly basis. The IT major, which had deferred wage hikes by a quarter, may suggest a muted guidance for the December quarter. Dollar revenue and constant currency sales are seen falling on a sequential basis.

Sharekhan expects Wipro to log 11.4 per cent YoY rise in profit at Rs 2,963 crore compared with Rs 2,659 crore in the corresponding quarter last year. Sales is seen rising 1.3 per cent YoY to Rs 22,949 crore compared with Rs 22,645 crore in the year-ago quarter. Ebit margin is seen at 16.1 per cent, up 103 basis points over 15.1 per cent in the year-ago quarter. Dollar revenue is seen falling 0.5 per cent QoQ. In CC terms, revenue may drop 0.4 per cent sequentially, Sharekhan said.

"Wipro is expected to report a sequential decline of -0.4 per cent in revenue in CC terms, in line with Q2 guidance of minus 2 per cent to 1 per cent. EBIT margin is expected to stay flat, aided by operational efficiencies," it said.

Elara Securities sees Wipro's Q2 profit at Rs 3,172 crore, up 17.1 per cent. It sees revenue for the quarter rising 2.2 per cent at Rs 23,010 crore. KRChoksey's Institutional Research sees profit at Rs 2,939 crore, up 11 per cent.

"Despite the macro overhang, management expects robust deal wins going ahead owing to strong execution capabilities and continue investment from their clients for their transformation. We believe EBIT to improve 11.49 per cent YoY and 4.78 per cent on a QoQ basis. Whereas the EBIT margin will show marginal improvement of 23 bps on a sequential quarter led by increase in utilisation rates, operating efficiency kicking in and reduction in fixed costs," it said.

Kotak said investors would focus on reasons for lag in growth rates versus peers and the steps the IT firm is taking to turnaround. Investors would also eye stability in senior management team, given several senior level departures, outlook for the consulting business and cause for divergence in revenue growth and reported deal bookings. Besides, Wipro's positioning in cost take-out and updates on vendor consolidation deals will be keenly followed.

This brokerage sees the IT major to report 11.8 per cent YoY rise in net profit at Rs 2,972 crore on a 1.3 per cent YoY rise in total sales at Rs 22,930 crore. Ebit margin is seen expanding 90 basis points QoQ or 167 bps YoY to 16 per cent. Kotak sees Wipro guiding for a revenue de-growth of 1 per cent to growth of 1 per cent for the December quarter.

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