Wipro Shares In Green Ahead Of Q2; IT Services Revenue May Fall In The Quarter

Azim Premji-backed Wipro shares are in focus on Wednesday ahead of their September quarter earnings for FY24. Wipro shares traded near its day's high in the early deals, and have gained over half a per cent ahead of the Q2FY24 numbers. In the quarter under review, the tech player is expected to record a decline in its IT services revenue, while EBIT margin may stay steady. A cut in the FY24 guidance is also on the cards.

At the time of writing, Wipro shares traded at Rs 413.20 apiece, up by 0.5% on BSE. It was near its day's high of Rs 413.60 apiece. The company's market cap stood at Rs 2,15,767.74 crore at the current market price.

What to expect from Wipro in Q2FY24?

IIFL Securities in its preview note said, "We forecast revenue to decline 1% cc QoQ in 2Q, closer to the lower end of the company's guided range. IT services EBIT margins are expected to remain flat QoQ, as a decline in revenues is offset by productivity improvements. We expect WPRO to guide to 0-2% cc QoQ growth in 3QFY24."

JM Financial expects -0.8% cc revenue growth for IT Services of the company within the guided band of -2% to +1%. However, the brokerage believes Wipro's EBIT margins to be stable at 16% in Q2 as it expects lower revenues to be offset by ongoing efficiency. In case of guidance, JM expects Wipro to guide for a 0-2% QoQ cc growth in 3QFY24.

Also, expecting a decline in IT services revenue by 0.5% sequentially in Q2FY24 led by softness in the FSI vertical, Incred Equities added that cost reduction measures will help Wipro offset the impact of revenue decline on EBIT margin.

In Q2FY24, HDFC Securities expect Wipro to report revenue of Rs 22,815 crore, down by 0.1% QoQ but up 1.2% YoY. While adjusted PAT is forecasted at Rs 2,868 crore, marginally down by 0.1% QoQ and up by 7.9% YoY. EBIT margin is expected at 15.3% to expand by 11 bps sequentially and 130 bps year-on-year.

Among key comments to watch in Q2FY24 will be -- 1) Quantum and a number of large deal wins. 2) Demand outlook for key verticals. 3) Outlook for discretionary spending, given WPRO's exposure to Consulting. 4) Levers to drive margins closer to pre-Covid levels. 5) Comments on recent senior management exits.

During the first quarter of FY24, the company posted a net income of Rs 2,870 crore, an increase of 12% YoY. Gross revenue was up by 6% YoY to Rs 22,830 crore in the quarter. IT Services Segment Revenue increased to $2,778.5 million, an increase of 0.8% YoY and an increase of 6.1% YoY in rupee terms, while IT Services Operating Margin for the quarter was at 16.0%, up 112 bps YoY. The company's total bookings were at $3.7 billion and large deals at $1.2 billion in Q1FY24, up by 9% YoY. Further, voluntary attrition has continued to moderate QoQ, coming in at an 8-quarter low of 14% in Q1'24.

For Q2FY24, Wipro estimated revenue from its IT Services business segment to be in the range of $2,722 million
to $2,805 million. This was translated to sequential guidance of -2.0% to +1.0% in constant currency terms.