Wipro Q4 Results Review – Total Contract Value Trend Not Impressive: Systematix

The turnover of Wipro Ltd. in the fourth quarter remains weak, but within the forecast range. The positive margin surprise resulted from cost rationalizations. The company ended fiscal 2024 with a 3.8% year-on-year decline in revenue, compared to Tata Consultancy Services Ltd's 4.1% growth. and 1.9% at Infosys in US dollars.

We expect the divergence between Wipro and TCS, Infosys to continue in FY25 as Wipro-

1. continues to show a weak trend in total deals compared to TCS which has a healthy trend and Infosys where TCV for large deals is healthy,

2. is more involved in the consulting business, which is a problem (Accenture was also under pressure in its consulting business),

3. has recently experienced several management departures, including that of the CEO and Chief Growth Officer.

Appointing an internal candidate as CEO could provide some stability at the top level (geo, vertical ladder), as external candidates typically bring in their own senior leadership, triggering change.

We observed certain positive trends during the quarter.

1. Revenue growth from Top Customers/Top Five Customers/Top 10 Customers (22% of revenue comes from the Top 10) turned positive year-over-year and quarter-over-quarter after declining for several quarters.

2. The BFSI industry saw positive QoQ growth after a few quarters of declines (this is where the Capco business is).

We need to be sure that there is a sustainable trend to complete the growth recovery. We reiterate USD revenue compound annual growth rate of 1.6% in FY23-26E.

However, in our view, margin expansion appears to be limited for the time being, as utilization is high and the quarter-on-quarter decline is stagnating.

We have achieved margin improvement of 50 basis points compared to FY23-26E (140 basis points previously). We maintain a 'Hold' stance with a revised target price of Rs 430 (previously Rs 440) based on 17x FY26E EPS.

Revenue growth keeping pace with competitors and stronger-than-expected margin expansion are the key upside risks to our estimates.

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