ICICI Securities: Wipro’s Q1 Weak As Expected; Margin Performance Commendable

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ICICI Securities Report

Wipro’s IT Services revenue declined 7.5% QoQ in constant currency (CC) terms in Q1FY21 with Communication segment and Consumer Business unit revenues declining QoQ by 16.2% and 12.4% in CC terms respectively. Margin execution in Q1FY21 was especially stellar with margins (ex-other operating income) improving approximately 165 basis points to 19% with key tailwinds being meaningful improvement in operating metrics, focus on reducing discretionary spends and rupee depreciation.

We expects revenue growth to recover from Q3FY21 though FY21 revenue will still decline by approximately 7.5% in U.S. dollar terms with EBIT margin (IT Services including ISRE) likely to decline by 100bps. Though margins should eventually recover back in the range of 17-17.5% delivered in FY19/FY20, we conservatively model 16.7% for FY22.

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