Wipro Q4 FY18 results preview: Announcement post market hours; key things to watch out for

Wipro Q4 FY18 results preview:  IT major is scheduled to report its March quarter results later in the day post market hours with analysts expecting 1 per cent to 2 per cent growth in revenues in constant currency (CC) terms. In the previous quarter, Wipro guidance was for 1 per cent to 3 per cent QoQ constant currency growth for Q4 FY18. Street will keep an eye on client-specific issues, growth in digital business, and the guidance that the management provides for the June quarter of financial year 2018-19.  Wipro results will come in the wake of the big 2 making their results announcements earlier, namely Infosys and TCS.

Wipro had posted 11.85 per cent quarter-on-quarter fall in consolidated net profit at Rs 1930.10 crore for the quarter ended December 31, 2017.  Meanwhile, Wipro share price was trading 2 per cent higher at Rs 293.95 in Wednesday's trade ahead of Q4 FY18 results. According to Motilal Oswal Securities, the stock is trading at 15.1 tims its FY19E and 13.4 times FY20E earnings.

Here is what brokerages expect from Wipro Q4 FY18 results: 

IDBI Capital

We forecast IT services revenue growth of 2 per cent QoQ in CC vs its guidance band of 1 per cent to 3 per cent. We factor cross-currency tailwind of ~90bps. We expect over-all EBIT margin to improve by ~20bps QoQ adjusted for the -240bps impact in Q3FY18 due to insolvency of a client.

We would watch for: 1) Q1FY19 guidance – expect Wipro to guide for IT services revenue growth of 0-2% in CC; 2) outlook on CY18 budgets and company's commentary to get back to industry growth rate; 3) outlook on the healthcare and utilities vertical; 4) growth in large clients and large deal wins; and 5) outlook for digital solutions.

Edelweiss Securities

We expect Wipro to post 2.1 per cent and 1.1 per cent growth (lower-end of guidance) in dollar and constant currency terms, respectively, due to client-specific issues in Utilities and Telecom. Operating margins are expected to rise 20 bps QoQ. We expect management to guide for 0.0-2.0 per cent growth in Q1FY19, which is a seasonally weak quarter for the company. Management commentary on Energy & Utility and Healthcare verticals and update on India & Middle East markets are keenly awaited. We maintain ‘HOLD’ on the stock. 

Kotak Institutional Equities

We expect constant-currency revenue growth of 1.5 per cent and cross-currency tailwind of 100 bps resulting in 2.5 per cent growth in USD terms. Growth will likely be led by financial services vertical. 3QFY18 EBIT margin was impacted to the extent of 240 bps due to a client insolvency. We expect adjusted EBIT margin to increase largely due to depreciation of INR against non-USD currencies.

Expect c/c revenue growth guidance of 0-2% for June 2018 quarter. June quarter is seasonally weak for Wipro. We expect investor focus on (1) convergence of growth with industry growth rate, (2) state of demand from weak utilities, healthcare and communications vertical, (3) measures taken to defend share in core areas of competence, i.e. IMS, ERD and BPO and (4) drivers of margin expansion. 

Motilal Oswal Securities

We expect growth to be at the lower end of the guided range at 1.5 per cent. A cross-currency tailwind of 100bp would lead to USD revenue growth of 2.5 per cent QoQ. We expect EBIT margin in IT Services to remain steady at 17.3 per cent (+10bp QoQ) because of low organic growth at a time when operational efficiencies have played out over the last few quarters.

Our PAT estimate is Rs 21.6b (+11.6% QoQ). However, adjusting for the one-time provisioning in the previous quarter, 4Q PAT would decline 4.1% QoQ on account of lower other income and higher ETR.

Key issues to watch out for: Revenue growth guidance for 1QFY19, commentary on Healthcare and Communications verticals, commentary on large deal wins and ramp-up schedule.