It is pertinent to note that shares of Wipro scaled a record high of Rs 375.85 on Friday, ahead of the earnings release on Monday, buoyed by announcement of the buyback plan and forecast-beating earnings by sector leader Tata Consultancy Services (TCS).
“Wipro should also be key beneficiary of: 1) core transformation; 2) higher cloud adoption; and 3) digital adoption,” Edelweiss analysts said adding that they would keenly watch strategic commentary by new CEO Thierry Delaporte and also like to know how many senior resources he has been able to bring on board till now.
The brokerage also expects Wipro to post modest margin expansion of around 40bps QoQ enabled by better cost control and efficient execution.
Apart from guidance, the brokerage said key things for investors to watch out for will be deals, including the tenure and pricing, segment commentaries (particularly retail, travel and product engineering services), attrition level and increment and promotion cycle.
HDFC Securities expects Wipro to post a 0.1 per cent YoY decline in net profit, while net sales in US dollar terms may have dipped 5.3 per cent.
Motilal Oswal expects Wipro to report a 4.1 per cent decline in September quarter net profit from a year ago, while it may have risen 1.8 per cent from the quarter before.
The brokerage expects modest sequential growth in the quarter, and sees the deal pipeline continuing healthy. It said the new management’s strategy for Wipro would be key, and outlook on energy vertical would be a key monitorable.
Kotak Institutional Equities expects Wipro to resume quarterly guidance, and foresee a 0-2 per cent revenue growth guidance for December quarter.
“Wipro’s payout policy is close to 50 per cent of net profit expected largely through buyback of shares. Investors will look forward to the buyback announcement,” the brokerage said pointing that Wipro completed its last buyback in mid-September 2019, and regulations require a cooling off period of 12-months before the next buyback announcement.
It expects investors to focus on– turnaround strategy under the new CEO, order backlog especially in light of a few large deal announcements, pricing pressure, if any, outlook for the energy segment in light of weak oil prices, and initiatives to participate in core transformation.
Kotak expects sequential constant currency revenue growth of 2 per cent and cross-currency tailwind of 145 basis points (bps), and believes growth will be led by addressing supply side constraints in cloud and infrastructure services.
“Wipro has announced plenty of large deals in the past three months, some of which have ramped up in the quarter and will lead to robust performance,” Kotak analyst said adding that they expect stable EBIT margin on a sequential basis and increase on YoY comparison.
On October 7, top IT firm TCS reported that its second quarter profit grew by 4.9 per cent to Rs 8,433 crore, and revenue by 3 per cent to Rs 40,135 crore. The company reported a 4.8 per cent sequential growth in revenue in constant currency terms, ahead of analyst estimates. TCS’s forecast-beating report card has raised expectations of a strong set of numbers from its peers.