- 13 Oct 2022
- ICICIdirect Research
Wipro reports largely in line numbers; LTM attrition moderatingWIPRO - 363 Change: 1.00 (0.28 %)
: The company’s IT services revenues increased 4.1% QoQ in CC (organic growth of 2.9% QoQ, 120 bps contribution from Rizing). Dollar revenues were up 2.3% QoQ to US$2,797.7 mn due to 180 bps cross currency headwinds. Rupee revenues were up 5.1% QoQ to Rs22,363 crore. Vertical wise CC growth was aided by BFSI, Consumer, Energy which was up 3.6%, 5.5%, 6.6% QoQ, respectively. Geography wise CC growth was aided by both Europe and America, which reported growth of 5.6%, ~3% QoQ, respectively. IT services margins were up 10 bps to 15.1% despite wage hike due to better pricing and operating efficiency. Attrition was down 30 bps QoQ 23.0% (down 80 bps from peak in Q4FY22). The company had 11 large wins in the quarter and large deal order book was strong at US$725 mn. The company is guiding for US$2,811 mn to US$2,853 mn revenue in Q3FY23 i.e 0.5-2% QoQ growth. The company hired 14,000 freshers in H1.
The company is not seeing any slowdown in tech spends from clients while it is cautiously optimistic on the Europe market due to current geopolitical risks and energy constraints, which is baked in its Q3 guidance along with normal furloughs. Strong growth in order book is expected to provide near term revenue visibility. Key positive during the quarter was moderation of attrition for a second consecutive quarter, which is a divergence trend vs. TCS. We believe this along with better pricing and moderation of subcontractor costs (12.9% of sales now vs. peak of 13.9%) is expected to have positive rub-off on the margins ahead. However, net addition of only 605 employees in Q2 vs. strong numbers in earlier quarters could be a reflection of some slowdown in capco business and layoffs done by the company in Europe business.