wipro (wpro in)

April 16, 2021 1

Rating: BUY | CMP: Rs431 | TP: Rs500

Success of turnaround visible…

Quick Pointers:

Reported revenue, margins & guidance way ahead than consensus estimates.

Strongest ever 1Q guidance of 2-4% QoQ CC revenue growth. Highest ever

deal win TCV of 7.2$ Bn, +33% YoY in 1HFY21.

We have increased our EPS estimates by 7%/5% for FY22/23 led by i) increase

in organic revenue growth assumption (12% growth for FY22E), ii) Increase in

EBIT margins assumption for FY22/23.

Wipro’s 4QFY21 performance was beat on all counts – i) revenue grew at 3.9%

QoQ USD (Ple: 3.5%, Cons: 3.5%) ii) EBIT margin of 21%, 100bps beat on our

estimates (Ple: 20%, Cons: 20.5%) iii) strongest ever guidance of 2-4% QoQ

CC revenue growth (vs our estimates of 1-3% QoQ CC) and iv) Strong 2HFY21

order book of $7.2 Bn, +33% YoY. Wipro’s growth trajectory has improved

since last 3 quarters & strong organic guidance of 2-4% QoQ (Ple:1-3%, Cons:

0-2.5%) shows sustainability. Not just on revenue, we have seen sustained

strong large deal momentum also USD 1.4 bn in Q4 (vs. USD 1.2 bn in Q3).

We are clearly witnessing new management focus & aggression towards

growth.

IT services margin is at six year high levels. Q4FY21 margin declined by ~70

bps QoQ to 21.0% due to full impact of wage hike for ~80% of employees,

partly offset by operational efficiencies, offshoring is at all-time high and

utilization. There are some near term headwinds to margins- 1) Roll-out hike

for top 20% employees effective June 1, 2) Skill based bonus for employees,

3) Capco integration to impact margins by a~200 bps in FY22 due to non-cash

charges & incentive plans. We believe that margins will comfortably stabilize

~19% (avg) for FY22/23 as there is strong tailwind from growth, shift to

offshoring, optimization of pyramid.

Wipro’s turnaround effort under leadership on new CEO is on right track. The

organization restructuring, new leadership and strengthened sales team are

in place to tap extremely strong demand momentum. However, ability to

successfully integrate the BFSI consulting firm Capco will be a key thing to

watch out for in coming quarters.

At the same time factors such as i) highest ever deal win TCV in last two

quarters, ii) management’s confidence of further increasing large deal

momentum and iii) strong guidance gives us confidence that the new

management’s strategic initiatives would drive stronger growth for FY22.

We forecast 17%/14% revenue growth for Wipro for FY22/23E & expect

margins at 18.4%/18.3% for FY22/23. We value Wipro on FY-23 earnings of

21X (29%/43% discount to Infy/TCS resp.) to arrive at changed TP of INR 500

(earlier: INR476). Wipro is currently trading at 19.9X/17.2X for FY22/23E

earnings of INR 21.7/25.0 respectively with EPS CAGR of 17.2% for FY21-23

respectively. Maintain Buy.

Wipro (WPRO IN)

April 16, 2021

Q4FY21 Result Update

☑ Change in Estimates | ☑ Target | Reco

Change in Estimates

Current Previous

FY22E FY23E FY22E FY23E

Rating BUY BUY

Target Price 500 476

Sales (Rs. m) 7,31,465 8,44,037 7,31,276 8,14,355

% Chng. - 3.6

EBITDA (Rs. m)1,83,266 2,10,586 1,71,984 2,01,109

% Chng. 6.6 4.7

EPS (Rs.) 21.7 25.0 20.2 23.8

% Chng. 7.2 5.1

Key Financials - Standalone

Y/e Mar FY20 FY21 FY22E FY23E

Sales (Rs. bn) 610 619 731 844

EBITDA (Rs. bn) 123 149 183 211

Margin (%) 20.2 24.0 25.1 24.9

PAT (Rs. bn) 95 108 123 142

EPS (Rs.) 15.8 18.2 21.7 25.0

Gr. (%) 0.8 14.8 19.2 15.3

DPS (Rs.) 0.9 1.0 2.9 2.9

Yield (%) 0.2 0.2 0.7 0.7

RoE (%) 16.9 19.4 20.4 19.8

RoCE (%) 15.6 18.9 19.6 19.5

EV/Sales (x) 3.8 3.7 2.9 2.4

EV/EBITDA (x) 18.9 15.4 11.5 9.5

PE (x) 27.2 23.7 19.9 17.2

P/BV (x) 4.6 4.6 3.7 3.1

Key Data WIPR.BO | WPRO IN

52-W High / Low Rs.505 / Rs.174

Sensex / Nifty 48,804 / 14,581

Market Cap Rs.2,360bn/ $ 31,496m

Shares Outstanding 5,479m

3M Avg. Daily Value Rs.12772.48m

Shareholding Pattern (%)

Promoter’s 74.37

Foreign 8.46

Domestic Institution 6.08

Public & Others 11.09

Promoter Pledge (Rs bn) -

Stock Performance (%)

1M 6M 12M

Absolute 1.0 26.1 130.9

Relative 5.1 5.4 45.2

Aniket Pande

[email protected] | 91-22-66322300

Aditi Patil

[email protected] |

Wipro

April 16, 2021 2

Best 4Q revenue growth in a decade: Wipro’s revenue grew at strong rate of

3.9% QoQ USD (Ple: 3.5%, Cons: 3.5%), above our and consensus estimates

led by surge in volumes. Revenue growth was 3% QoQ in CC terms, in-line

with our estimates, implying benefit from USD depreciation against EUR &

GBP. For the full year revenue came at $8.14 Bn, -1.4% YoY USD, -2.3% YoY

CC.

Management mentioned that they are seeing significant traction across all

markets – Americas 1 grew by 3.2% QoQ USD and Americas 2 grew by 4.5%

QoQ USD. Growth in Europe +5.6% QoQ $ was led by strong performance in

UK, Ireland & Germany. Growth in APMEA was low at 0.9% QoQ $ because

of their conscious exit from low quality margin dilutive business. Sequential

revenue growth was led by growth led by strong recovery in Consumer BU

(+7.7% QoQ USD) and E&U +4.8% QoQ USD and strong demand momentum

in BFSI (+3.8% QoQ USD), & Technology +10.2% QoQ USD.

Highest ever order book: Wipro won large deal TCV of $1.4 Bn in 4QFY21

and highest ever total deal TCV of 7.1$ Bn in 2HFY21, +33% YoY. Wipro won

two large multi-multi-million dollar deals this quarter – i) US-based industrial

manufacturing company and ii) US-based digital transformation and consulting

agency apart from the two announced earlier in the quarter (Telefonica & Fiat

Chrysler. The new mega deal and large deal with Telefonica Germany aided

the 16.7% increase in large deal TCV to US$1.4 bn. Wipro announced a mega

deal win in its US consumer business in 4QFY21. TCV of the deal has the

potential to reach US$1 bn.

We believe that Wipro can further improve its volume of large deals given

strong demand environment, increased client focus with pro-active hunting and

mining of deals, and improved execution rigour under leadership of new CEO.

iDEAS service vertical grew at 2.1% QoQ USD driven by demand for digital,

data & engineering. iCORE grew by 4.3% QoQ USD led by digital operations,

cloud infrastructure services and cybersecurity. Management mentioned that

cloud contributes to 1/4th of revenues and is growing several times higher

than overall revenues. They also see double digit growth in cyber

security and digital CX.

Strong growth in top 10 clients (+7% QoQ) reflects success of highly focused

sales team in mining large clients. Wipro continues to invest in industry experts

and strengthens sales team with addition of 530 sales personnel in 4Q

Management mentioned that they have received very positive response from

Global Key Account executives.

Beat in operating margin: EBIT margins surprised us at 21% (-60 bps QoQ

and + 340 bps YoY) vs our estimates of 20.0% & cons: 20.2%. Impact of wage

hike rollout from Jan 1 2021 was largely offset by higher offshore mix and stable

utilization (excl. trainees) (86.0% in 4Q vs 86.3% in 4Q), stable sub-contracting

costs. We anticipate margins for FY22 and FY23 to be lower by ~200-250 bps

due to impact of wage hikes and Capco acquisitions charges.

We delivered a third consistent

quarter of strong revenue growth,

deal wins and operating margins.

Wipro

April 16, 2021 3

Strategy to manage supply side pressures: Attrition inched up by +110 bps

QoQ to 12.1% given strong demand for digitally skilled talent. Wipro added

7404 employees in 4QFY21 and hiring momentum will continue at strong pace

to ease out supply side pressures. Wipro had rolled out wage hikes and

promotions to 80% of their staff (junior) from Jan 1 2021 and for the rest 20%

(senior management) they will roll-out from 1st April. Management mentioned

that salary hikes and bonuses were aggressive as compared to industry and

were based on performance and criticality of the skillset. For FY22 they will roll-

out hikes in June 2021. Wipro will handle supply side issues through

aggressive hiring and wage hike practices on-par or higher than industry.

Strongest guidance: Management expects revenue from IT Services

business to be in the range of $2,195 million to $2,238 million. This translates

to a sequential growth of 2.0% to 4.0% QoQ. This does not include revenue

from recently announced acquisitions of Capco and Ampion. Large component

of Metro AG deal will ramp up in 1QFY21. Capco and Ampion acquisitions are

expected to be completed in June 2021. Wipro and Capco have started jointly

interacting with clients and are seeing strong traction in BFSI consulting plus

large digital transformation. The strong guidance is from 1.5% contribution from

Metro AG deal, ~0.5% contribution from Telefonica deal and potential revenue

growth contribution from new mega-deal signed in March 2021 quarter.

Strong cash flow management: DSO improved by 8 days YoY. For FY21,

OCF was at ₹147.6 billion, an increase of 46.6% YoY, which is 136.7% of Net

Income. FCF/PAT was also healthy at 119%. Cash on book declined to $3.6

Bn because of $95 Bn spent on Buyback concluded in Jan 2021. Total dividend

for FY21 amounts to of INR 1.

New leadership team to drive in more client focus: Wipro has on-boarded

several external hires in senior management positions in recent month. Wipro

has hired quite a few leaders for roles of country/geo heads to complement

shift to a geography-based operating model. P&L ownership, driving growth

through account mining and large deals are key mandates for new hires. Most

of the new leaders are experienced personnel from global Tier-1 organizations.

Strong bounce back from 2Q onwards in FY21: After sharp declined in

1QFY21, Wipro posted three consecutive quarter of strong revenue growth

resulting in lower decline in FY21 revenue, -1.4% YoY. EBIT margin also

expanded 280 bps YoY to 19.9% in FY21 led by improved operating metrics

and execution focus. Net Income for the year was INR 107.9 billion, an increase

of 11.0% YoY. EPS for the year was at INR 19.11, an increase of 14.6% YoY

led by revenue growth, margin expansion and lower ETR.

Wipro has won a multi-million-dollar

integrated engagement from a

leading US-based industrial

manufacturing company to transform

and modernize its business functions

and enable it to become a digital

enterprise via transformation in

applications, infrastructure, cyber

security and service delivery.

Cloud demand and adjacencies

created as result of migration to cloud

will sustain strong deal momentum in

cloud for long term.

Wipro

April 16, 2021 4

Q4FY21: Quick View on Results

IFRS Consolidated (RS m) 4Q21 3Q21 QoQ 4Q20 YoY Ple % var from

est

IT Revenue (US$ m) 2,152 2,071 3.9% 2,074 3.8% 2,142 0.5%

Consolidated Sales 1,62,454 1,56,700 3.7% 1,57,110 3.4% 1,59,054 2.1%

EBITDA 41,258 41,174 0.2% 31,996.0 28.9% 39,493 4.5%

EBITDA Margin (%) 25.4% 26.3% -88 bps 20.4% 503 bps 24.8% 57 bps

EBIT 34,167 33,813 1.0% 25,887 32.0%

EBIT Margin (%) 21.0% 21.6% -55 bps 16.5% 455 bps 20.0% 103 bps

PBT 37,496 38,489 -2.6% 29,216 28.3% 36,465 2.8%

Tax 7,755 8,524 -9.0% 7,755 0.0% 7,720 0.5%

PAT 29,721 29,667 0.2% 21,270 39.7% 28,684 3.6%

EPS (Rs) 5.4 5.2 4.1% 3.7 44.3% 5.00 7.7%

Source: Company, PL

Key external hires under new CEO

Period Name Designation Previous Role

Apr - 21 Suzzane Dann Senior Vice president and Sector head for Capital markets & Insurance, North America

Corporate vice President and GM at Avande (Accenture & Microsoft JV)

Apr - 21 Sarah Adam Gedge MD – Australia and New Zealand

Worked in project and service-based consultancies for more than 25 years across ANZ, APMEA and LATM

Mar - 21 Subha Tatavarti CTO Lead Walmart’s product and technology transformation

Mar-21 Philippe Dintrans Head, Domain & consulting, iDEAS Global consulting leader, BFS, Cognizant

Feb-21 Stephanie Trautman Chief Growth Officer MD, Global Strategic Account Lead, NE Leadership Team, Accenture

Feb-21 Pierre Bruno CEO, Europe VP & MD, South Europe, DXC

Feb-21 Graziella Neuvéglise Regional head, MD, Southern Europe VP, Manufacturing, France, CGI

Feb-21 Tomoaki Takeuchi MD, Head, Japan President, Cognizant Japan

Feb-21 René Mulder MD, Head, Switzerland MD, Chairman, DXC Technology Switzerland

Jan-21 Douglas Silva MD, Head, Brazil Sales Director, Brazil, AWS

Dec-20 Tony Buffomante SVP, Head, Cybersecurity & Risk services Principal, Head, US, Cyber Security Services, KPMG

Nov-20 Michael Seiger MD, Head, Germany and Austria Global head, Application management, Atos

Source: Company, PL

Wipro

April 16, 2021 5

Valuation

We forecast 17%/14% revenue growth for Wipro for FY22/23E & expect margins at

18.4%/18.3% for FY22/23. We value Wipro on FY-23 earnings of 21X (29%/43%

discount to Infy/TCS resp.) to arrive at changed TP of INR 500 (earlier: INR476).

Wipro is currently trading at 19.9X/17.2X for FY22/23E earnings of INR 21.7/25.0

respectively with EPS CAGR of 17.2% for FY21-23 respectively. Maintain Buy.

Change in Estimates

Year to 31-Mar FY21E FY22E FY23E

IT Services revenue (US$ m)

- New 8,313 9,752 11,108

- Old 8,273 9,749 10,718

Change 0.5% 0.0% 3.6%

USD Revenue growth 0.7% 17.3% 13.9%

EBIT Margins

- New 19.9% 18.6% 18.5%

- Old 19.6% 17.1% 18.0%

Change 27 bps 154 bps 49 bps

EPS - Fully diluted (Rs)

- New 18.2 21.7 25.0

- Old 18.0 20.2 23.8

Change 1.0% 7.2% 5.1%

Source: PL

WIPRO One year forward P/E valuation chart

17.38

23.3

6.0

8.5

11.0

13.5

16.0

18.5

21.0

23.5

26.0

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P/E Mean Mean + Std Dev Mean - Std Dev

Source: Company, PL

Wipro

April 16, 2021 6

Revenue growth

3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21

Strategic Business Units $ QoQ growth

BFSI 4.8% 1.7% -1.5% -0.5% 0.9% -2.6% -6.4% 5.4% 1.6% 3.9%

Communications 1.8% -0.3% 1.7% -2.9% 2.2% -1.0% -17.1% 7.8% 2.0% -0.1%

Consumer Business Unit 1.2% 5.3% -5.4% 3.1% 8.0% -1.6% -12.3% 5.6% 5.2% 7.7%

Energy, Natural Resources and Utilities 3.4% -0.1% -1.8% 1.3% 2.2% -1.8% -4.4% 1.3% 5.6% 4.7%

Health Business Unit 2.6% 2.2% -1.8% -1.0% 3.0% 2.0% -7.3% 5.2% 5.5% -2.8%

Manufacturing & Technology -1.9% -1.0% -0.3% 1.5% -0.7% 1.4% -4.7% -0.6% 4.9% 5.9%

Strategic Business Units $ YoY growth

BFSI

Communications 15.1% 12.8% 8.7% 4.6% 0.7% -3.6% -8.4% -3.1% -2.4% 4.1%

Consumer Business Unit -7.4% -0.7% 6.1% 0.2% 0.6% -0.1% -18.5% -9.6% -9.8% -9.0%

Energy, Natural Resources and Utilities 1.1% 11.0% 4.5% 3.9% 10.9% 3.6% -3.9% -1.5% -4.1% 5.0%

Health Business Unit 8.7% 3.6% 3.3% 2.8% 1.6% -0.1% -2.8% -2.8% 0.4% 7.0%

Manufacturing & Technology 9.6% -4.4% -0.5% 2.0% 2.4% 2.2% -3.6% 2.5% 4.9% 0.0%

-3.6% -9.9% -4.8% -1.8% -0.6% 1.9% -2.6% -4.6% 0.8% 5.3%

Strategic Business Units CC QoQ growth

Communications

Consumer Business Unit 5.3% 1.3% -0.6% -2.4% 1.5% -0.2% -16.2% 4.6% 0.7% -0.4%

Energy, Natural Resources and Utilities 2.1% -1.2% 2.8% 4.1% 7.0% -0.1% -12.4% 4.5% 5.2% 6.9%

BFSI 1.4% 5.3% -4.4% 2.3% 1.2% 1.3% -5.4% -2.4% 4.1% 2.7%

Health Business Unit 4.6% -0.7% 0.2% -0.1% 0.4% -0.9% -6.4% 3.7% 1.2% 2.7%

Manufacturing & Technology 2.8% 2.1% -1.5% -0.6% 3.4% 2.3% -7.2% 4.1% 5.0% -2.9%

Technology 0.4% -0.7% -2.0% 3.3% 4.4% -1.3% -8.1% 3.5% 4.0% -1.1%

-4.2% -2.0% 2.7% 1.3% -3.7% 3.2% -2.1% -4.7% 4.5% 9.9%

Strategic Business Units CC YoY growth

Communications

Consumer Business Unit 17.5% 15.9% 11.2% 2.4% 1.3% 2.0% -16.9% -10.3% -11.4% -11.4%

Energy, Natural Resources and Utilities -3.2% 3.2% 8.8% 6.1% 12.1% 6.4% -2.5% -2.1% -3.6% 2.9%

BFSI 10.0% 14.8% 7.7% 6.3% 2.6% 4.9% -1.7% -5.4% -2.6% 0.1%

Health Business Unit 9.8% 9.4% 7.8% 5.9% 1.0% -1.3% -6.9% -3.3% -2.5% 0.6%

Manufacturing & Technology -4.1% -2.3% 0.4% 3.0% 4.2% 3.6% -2.1% 2.3% 3.7% -1.6%

Technology -0.2% -3.2% -0.1% 0.9% 4.9% 4.2% -2.0% -1.5% -2.4% -2.8%

Source: Company, PL

Strong Revenue Performance

0.3%1.1%

0.1%

2.4% 1.1%

1.8%

-7.5%

3.40%

3.00%

2.8%

2.9%

2.4%

5.1%

3.8%

3.8%

-4.4%

-3.40%-2.00%

0.50%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

2Q

18

3Q

18

4Q

18

1Q

19

2Q

19

3Q

19

4Q

19

1Q

20

2Q

20

3Q

20

4Q

20

1Q

21

2Q

21

3Q

21

4Q

21

CC revenue growth QoQ CC revenue growth YoY

Source: Company, PL

Wipro

April 16, 2021 7

Tight cost management supported margins

16

.1%

15

.8%

16.4

%

14

.3% 1

6.0

%

16

.8%

14.4

%

13.7

%

14

.3%

13

.2%

18

.4%

17

.0%

16

.2%

17

.3%

17.1

%

15

.9% 17

.2% 18

.5%

21.2

%

20.5

%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

1Q

17

2Q

17

3Q

17

4Q

17

1Q

18

2Q

18

3Q

18

4Q

18

1Q

19

2Q

19

3Q

19

4Q

19

1Q

20

2Q

20

3Q

20

4Q

20

1Q

21

2Q

21

3Q

21

4Q

21

EBIT Margins

Source: Company, PL

Strong demand momentum in BFSI

514

543

558

579

593

613

643

654

644

641

647

630

590

622

632

656

1.2%

5.7%2.7%

3.8%

2.3%

3.4%4.8%1.7%

-1.5%-0.5%

0.9%

-2.6%

-6.4%

5.4%

1.6%

3.9%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

400

450

500

550

600

650

700

1Q

18

2Q

18

3Q

18

4Q

18

1Q

19

2Q

19

3Q

19

4Q

19

1Q

20

2Q

20

3Q

20

4Q

20

1Q

21

2Q

21

3Q

21

4Q

21

BFSI (USD mn) BFSI Growth QoQ

Source: Company, PL

Strong recovery in CBU in 4QFY21

305 313 316 303 304 315 319336

318 328354 348

306323

340366

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

50

100

150

200

250

300

350

400

1Q

18

2Q

18

3Q

18

4Q

18

1Q

19

2Q

19

3Q

19

4Q

19

1Q

20

2Q

20

3Q

20

4Q

20

1Q

21

2Q

21

3Q

21

4Q

21

Revenues from Consumer BU (USD Mn) Growth YoY (%)

Source: Company, PL

Wipro

April 16, 2021 8

Vertical-wise Revenues

(US$ m) 4Q21 3Q21 QoQ gr. 4Q20 YoY gr.

Communications 107.6 107.7 -0.1% 118.2 -9.0%

BFSI 656.5 631.7 3.9% 630.4 4.1%

Manufacturing & Tech 458.5 432.8 5.9% 435.5 5.3%

Healthcare and Life Sciences 279.8 287.9 -2.8% 279.9 0.0%

Consumer 365.9 339.6 7.7% 348.4 5.0%

Energy & Utilities 284.1 271.3 4.7% 265.4 7.0%

% of Total

Communications 5.0% 5.2% -20 bps 5.7% -70 bps

BFSI 30.5% 30.5% 0 bps 30.4% 10 bps

Manufacturing & Tech 21.3% 20.9% 40 bps 21.0% 30 bps

Healthcare and Life Sciences 13.0% 13.9% -90 bps 13.5% -50 bps

Consumer 17.0% 16.4% 60 bps 16.8% 20 bps

Energy & Utilities 13.2% 13.1% 10 bps 12.8% 40 bps

Source: Company, PL

Market-wise revenue mix


Americas 1 628.5 608.9 3.2% 624.2 0.7%

Americas 2 630.7 602.7 4.6% 613.8 2.7%

Europe 611.3 579.9 5.4% 557.8 9.6%

APMEA 282.0 279.6 0.9% 277.9 1.5%

% of Total

Americas 1 29.2% 29.4% -20 bps 30.1% -90 bps

Americas 2 29.3% 29.1% 20 bps 29.6% -30 bps

Europe 28.4% 28.0% 40 bps 26.9% 150 bps

APMEA 13.1% 13.50% -40 bps 13.40% -30 bps

Source: Company, PL

Service wise revenues


iDEAS 1222.6 1186.7 3.0% 1211.0 1.0%

iCORE 929.8 884.3 5.1% 862.7 7.8%

% of Total

iDEAS 56.8% 57.3% -50 bps 58.4% -160 bps

iCORE 43.2% 42.7% 50 bps 41.6% 160 bps

Source: Company, PL

Wipro

April 16, 2021 9

Client Metrics

4Q21 3Q21 QoQ gr. 4Q20 YoY gr.

Total >1$mn 566 567 -1 574 -8

US$1m - US$3m 217 226 -9 233 -16

US$3m - US$5m 92 81 11 81 11

US$5m - US$10m 90 92 -2 94 -4

US$10m - US$20m 74 71 3 70 4

US$20m - US$50m 53 59 -6 56 -3

> US$50m 40 38 2 40 0

> US$100m 11 10 1 15 -4

Source: Company, PL

Revenues from Top clients


Revenue from new Customers 77.5 53.8 43.9% 62.2 24.6%

Revenue from repeat businesses 2,075 2,017 2.9% 2,011 3.2%

Number of new customers 52 89 -37 65 -13

Total Number of active customers 1,120 1,136 -1.4% 1,074 4.3%

Customer Concentration

Top Customer 66.7 64.2 3.9% 62.2 7.3%

Top 2-5 Clients 195.9 182.2 7.5% 190.8 2.7%

Top 5 262.6 246.4 6.6% 253.0 3.8%

Top 6-10 157.1 145.0 8.4% 147.2 6.7%

Top 10 419.7 391.4 7.2% 400.2 4.9%

Non Top 10 customers 1,732.7 1,679.6 3.2% 1,673.5 3.5%

Revenue from new Customers (%) 3.6% 2.6% 100 bps 3.0% 20.0%

Customer Concentration

Top Customer 3.1% 3.1% 0 bps 3.0% 10 bps

Top 5 12.2% 11.9% 30 bps 12.2% 0 bps

Top 10 19.5% 18.9% 60 bps 19.3% 20 bps

Source: Company, PL

Headcount Metrics


Closing HC 1,97,712 1,90,308 7404 1,82,886 14,826

Gross Utilization 76.7% 74.8% 190 bps 73.4% 330 bps

Net Utilization (Excl Training) 86.0% 86.3% -30 bps 82.6% 340 bps

Attrition

IT Services excl BPO and I&ME

Voluntary TTM 12.1% 11.0% 110 bps 14.7% -260 bps

Sales & Support Staff (IT Services) (avg) 15,368 14,838 530 14,908 460

Source: Company, PL

Revenue contribution


Revenue from FPP 63.0% 63.2% -20 bps 63.2% -20 bps

Onsite Revenue 45.5% 47.3% -180 bps 51.8% -630 bps

Offshore Revenue 54.5% 52.7% 180 bps 48.2% 630 bps

Source: Company, PL

Wipro

April 16, 2021 10

Financials

Income Statement (Rs m)


Net Revenues 6,10,232 6,19,430 7,31,465 8,44,037

YoY gr. (%) 4.2 1.5 18.1 15.4

Employee Cost 4,14,028 3,94,567 4,45,563 5,32,875

Gross Profit 1,96,204 2,24,863 2,85,902 3,11,162

Margin (%) 32.2 36.3 39.1 36.9

SG&A Expenses - - - -

Other Expenses - - - -

EBITDA 1,23,474 1,48,777 1,83,266 2,10,586

YoY gr. (%) 10.4 20.5 23.2 14.9

Margin (%) 20.2 24.0 25.1 24.9

Depreciation and Amortization 22,057 28,638 48,908 56,408

EBIT 1,01,417 1,20,139 1,34,358 1,54,178

Margin (%) 16.6 19.4 18.4 18.3

Net Interest - - - -

Other Income 20,635 18,843 21,848 25,848

Profit Before Tax 1,22,052 1,38,982 1,56,206 1,80,026

Margin (%) 20.0 22.4 21.4 21.3

Total Tax 26,349 30,345 32,662 37,570

Effective tax rate (%) 21.6 21.8 20.9 20.9

Profit after tax 95,703 1,08,637 1,23,544 1,42,456

Minority interest 495 716 240 240

Share Profit from Associate - - - -

Adjusted PAT 95,208 1,07,921 1,23,304 1,42,216

YoY gr. (%) 0.9 13.4 14.3 15.3

Margin (%) 15.6 17.4 16.9 16.8

Extra Ord. Income / (Exp) - - - -

Reported PAT 95,208 1,07,921 1,23,304 1,42,216

YoY gr. (%) 0.9 13.4 14.3 15.3

Margin (%) 15.6 17.4 16.9 16.8

Other Comprehensive Income - - - -

Total Comprehensive Income 95,208 1,07,921 1,23,304 1,42,216

Equity Shares O/s (m) 6,011 5,936 5,692 5,693

EPS (Rs) 15.8 18.2 21.7 25.0

Source: Company Data, PL Research

Balance Sheet Abstract (Rs m)


Non-Current Assets

Gross Block 2,28,494 2,37,404 2,50,119 2,62,242

Tangibles 81,120 85,192 97,907 1,10,030

Intangibles 1,47,374 1,52,212 1,52,212 1,52,212

Acc: Dep / Amortization - - - -

Tangibles - - - -

Intangibles - - - -

Net fixed assets 2,28,494 2,37,404 2,50,119 2,62,242

Tangibles 81,120 85,192 97,907 1,10,030

Intangibles 1,47,374 1,52,212 1,52,212 1,52,212

Capital Work In Progress - - - -

Goodwill - - - -

Non-Current Investments 16,748 16,420 16,420 16,420

Net Deferred tax assets - - - -

Other Non-Current Assets 51,969 54,424 54,424 54,424

Current Assets

Investments 1,89,635 1,75,707 1,75,707 1,75,707

Inventories 1,865 1,064 1,256 1,450

Trade receivables 1,04,474 94,298 1,11,354 1,28,491

Cash & Bank Balance 1,44,499 1,69,793 2,47,293 3,44,267

Other Current Assets 61,235 82,324 96,034 1,09,809

Total Assets 7,98,919 8,31,434 9,52,607 10,92,810

Equity

Equity Share Capital 2,930 2,930 2,930 2,930

Other Equity 5,54,348 5,50,165 6,54,541 7,77,829

Total Networth 5,57,278 5,53,095 6,57,471 7,80,759

Non-Current Liabilities

Long Term borrowings 4,840 7,458 7,458 7,458

Provisions - - - -

Other non current liabilities 36,496 39,343 39,343 39,343

Current Liabilities

ST Debt / Current of LT Debt 73,202 75,874 67,874 59,874

Trade payables 78,129 78,870 93,135 1,07,468

Other current liabilities 65,062 75,296 85,588 95,929

Total Equity & Liabilities 8,16,882 8,31,434 9,52,607 10,92,810


Wipro

April 16, 2021 11

Cash Flow (Rs m)

Y/e Mar FY20 FY21 FY22E FY23E Year

PBT 1,22,052 1,38,982 1,56,206 1,80,026

Add. Depreciation 22,057 28,638 48,908 56,408

Add. Interest (17,573) (15,848) (19,848) (23,848)

Less Financial Other Income 20,635 18,843 21,848 25,848

Add. Other - - - -

Op. profit before WC changes 1,26,536 1,51,772 1,85,266 2,12,586

Net Changes-WC 34,498 1,255 (6,401) (6,431)

Direct tax (26,349) (30,345) (32,662) (37,570)

Net cash from Op. activities 1,34,685 1,22,682 1,46,204 1,68,585

Capital expenditures (49,208) (37,548) (61,623) (68,530)

Interest / Dividend Income - - - -

Others 14,333 14,256 - -

Net Cash from Invt. activities (34,875) (23,292) (61,623) (68,530)

Issue of share cap. / premium - - - -

Debt changes (21,425) 5,290 (8,000) (8,000)

Dividend paid (6,517) (6,523) (18,928) (18,928)

Interest paid 17,573 15,848 19,848 23,848

Others (1,257) (1,093) - -

Net cash from Fin. activities (11,626) 13,522 (7,080) (3,080)

Net change in cash 88,184 1,12,912 77,500 96,974

Free Cash Flow 85,477 85,134 84,580 1,00,054


Quarterly Financials (Rs m)

Y/e Mar Q1FY21 Q2FY21 Q3FY21 Q4FY21

Net Revenue 1,49,131 1,51,145 1,56,700 1,62,454

YoY gr. (%) 1.3 (0.1) 1.3 3.4

Raw Material Expenses 97,546 98,807 96,386 1,01,828

Gross Profit 51,585 52,338 60,314 60,626

Margin (%) 34.6 34.6 38.5 37.3

EBITDA 31,790 34,555 41,174 41,258

YoY gr. (%) 10.5 11.8 29.5 28.9

Margin (%) 21.3 22.9 26.3 25.4

Depreciation / Depletion 6,154 6,580 7,927 7,977

EBIT 26,841 28,313 33,813 34,167

Margin (%) 18.0 18.7 21.6 21.0

Net Interest - - - -

Other Income 5,284 4,102 5,242 4,215

Profit before Tax 30,951 32,071 38,489 37,496

Margin (%) 20.8 21.2 24.6 23.1

Total Tax 6,838 7,228 8,524 7,755

Effective tax rate (%) 22.1 22.5 22.1 20.7

Profit after Tax 24,113 24,843 29,965 29,741

Minority interest 211 187 298 20

Share Profit from Associates 31 (6) - -

Adjusted PAT 23,902 24,656 29,667 29,721

YoY gr. (%) 0.1 (3.4) 20.8 39.7

Margin (%) 16.0 16.3 18.9 18.3

Extra Ord. Income / (Exp) - - - -

Reported PAT 23,902 24,656 29,667 29,721

YoY gr. (%) 0.1 (3.4) 20.8 39.7

Margin (%) 16.0 16.3 18.9 18.3

Other Comprehensive Income - - - -

Total Comprehensive Income 23,902 24,656 29,667 29,721

Avg. Shares O/s (m) 5,703 5,706 5,741 5,525

EPS (Rs) 4.2 4.3 5.2 5.4


Key Financial Metrics


Per Share(Rs)

EPS 15.8 18.2 21.7 25.0

CEPS 19.5 23.0 30.3 34.9

BVPS 92.7 93.2 115.5 137.1

FCF 14.2 14.3 14.9 17.6

DPS 0.9 1.0 2.9 2.9

Return Ratio(%)

RoCE 15.6 18.9 19.6 19.5

ROIC 17.2 21.0 21.1 20.0

RoE 16.9 19.4 20.4 19.8

Balance Sheet

Net Debt : Equity (x) (0.5) (0.5) (0.5) (0.6)

Debtor (Days) 62 56 56 56

Valuation(x)

PER 27.2 23.7 19.9 17.2

P/B 4.6 4.6 3.7 3.1

P/CEPS 22.1 18.7 14.2 12.3

EV/EBITDA 18.9 15.4 11.5 9.5

EV/Sales 3.8 3.7 2.9 2.4

Dividend Yield (%) 0.2 0.2 0.7 0.7


Wipro

April 16, 2021 12

Price Chart Recommendation History

No. Date Rating TP (Rs.) Share Price (Rs.)

1 05-Apr-21 BUY 476 417

2 05-Mar-21 BUY 474 439

3 14-Jan-21 BUY 493 459

4 04-Jan-21 BUY 434 388

5 23-Dec-20 BUY 415 364

6 19-Nov-20 BUY 415 345

7 14-Oct-20 BUY 415 376

8 05-Oct-20 BUY 350 313

9 01-Oct-20 BUY 350 314

10 15-Jul-20 BUY 257 225

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)

1 Coforge BUY 3,020 2,924

2 Cyient BUY 683 666

3 HCL Technologies BUY 1,168 1,001

4 Infosys BUY 1,632 1,397

5 L&T Technology Services BUY 3,006 2,721

6 Larsen & Toubro Infotech BUY 4,394 4,121

7 Mindtree BUY 2,326 2,068

8 Mphasis BUY 1,869 1,749

9 Persistent Systems BUY 2,017 1,954

10 Redington (India) BUY 189 184

11 Sonata Software BUY 537 522

12 Tata Consultancy Services BUY 3,636 3,247

13 TeamLease Services BUY 4,002 3,774

14 Tech Mahindra BUY 1,143 990

15 Wipro BUY 476 417

16 Zensar Technologies BUY 290 276

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%

Accumulate : 5% to 15%

Hold : +5% to -5%

Reduce : -5% to -15%

Sell : < -15%

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

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Wipro

April 16, 2021 13

ANALYST CERTIFICATION

(Indian Clients)

We/I, Mr. Aniket Pande- MBA, Ms. Aditi Patil- MBA Finance Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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