Wipro Q2 Results Preview: Revenue to drop 2% YoY, EBIT margin likely flat on wage hike impact; bonus issue eyed

Wipro Q2 Results 2024 Preview: India's fourth-largest information technology (IT) services company will hold its board meeting on Thursday, October 17, 2024, to consider its earnings results for the July-September quarter of fiscal 2024-25 (Q2FY25). Wipro Ltd's board of directors will consider a proposal for a bonus issue of shares in the upcoming board meeting later today. 

Most D-Street analysts and domestic brokerages have estimated decent net profit growth for the leading IT major; however, margin and revenue are likely to be flat due to softer deals and the impact of the one-month wage hike. An average of brokerage estimates indicates that Wipro's net profit is likely to rise between 9-12 per cent, while revenue may drop two per cent.

Also Read: Q2 Update: IT giants Infosys, Wipro to announce Sept quarter results on THESE dates, dividend ahead

“The financial results would be finally approved by the Board of Directors on the evening of October 17, 2024. It is further informed that the trading window for dealing in the securities of the company has been closed from September 16, 2024, till the close of trading hours of October 19, 2024 (both days inclusive),” said Wipro in a regulatory filing to the stock exchanges.

Shares of Wipro have rallied 15.85 per cent in the last six months and nearly 29.46 per cent in the last one year. The IT giant commands a market cap of ₹2,78,444.16 crore. On Wednesday, shares of Wipro settled 0.13 per cent lower at ₹532.25 apiece on the BSE against the benchmark's correction.

Wipro Q2 Results: Here's what leading  brokerages expect
 

1.Emkay Global Financial Services

The brokerage expects 0.9 per cent USD revenue growth in the IT services segment after factoring in 60 bps cross-currency tailwinds. Wipro had guided revenue growth in the range of -1 per cent to +1 per cent QoQ (quarter-on-quarter) in CC terms. 

Also Read: Wipro to consider bonus issue of shares; meeting to be conducted on October 17, details here

“We expect IT Services EBIT margins to remain flattish sequentially despite the one-month impact of the salary hike. Overall, EBITM will remain flattish QoQ.  Q3 outlook and guidance, deal wins, attrition trends, and bonus issue of shares are among the key things to watch out for,” said Emkay Global.

2.ICICI Securities

Demand: ↑ Demand commentary has not improved with continued pressure on discretionary spending. However, the brokerage expects some green shoots in consulting -in line with superior Capco performance in Q4FY24, Q1FY25. Q2 is estimated to fare better than Q1. 

"We expect revenue growth to be flat QoQ, within the guided range of -1 to 1 per cent. This will include the telco deal ramp-up from Q1. Energy and utility verticals are estimated to be soft (large deals coming to an end).

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Deal TCV: ↓ We see some decline in the large deal announcements QoQ in Q2 with some deals from hi-tech and ER&D.  Margin: ↓ Q2 will impact a one-month wage hike. So, we expect a 130 bps QoQ margin decline. The company is expected to focus on the fixed-price productivity lever," said ICICI Securities.

3.JM Financial Services

The brokerage expects cc revenue growth to be flat sequentially, ~30 bps cross currency tailwind should result in a 0.3 per cent QoQ USD revenue growth for IT Services. "We expect growth in BFSI (especially US) to offset by sustained weakness in E&U. We have not built a meaningful contribution from the USD 500 mn Telecom deal in 2Q.

We have built a one-month wage hike (effective September 1). However, operational efficiencies and favourable FX will likely aid 35bps sequential expansion in EBIT margin to 16.8 per cent. We expect Wipro to guide for a -1 to +1 per cent QoQ cc growth in 3QFY25," said the brokerage.
 

Also Read: HCL Tech Q2 Results: Net profit up 11% YoY with hike in revenue guidance, dividend declared; 5 key highlights

4.Motilal Oswal Financial Services

The brokerage expects flat revenue in 2Q due to macro impact and continued softness in Communications, Manufacturing, and E&U. IT Service margin is expected to be range-bound, and the strategy to trim the low-margin businesses and low-potential accounts is progressing well.

“Expect the demand environment to improve in the US, particularly in BFS, with significant regional Capco activity. Healthcare is gaining momentum across payer, provider, and life sciences sectors, all showing good traction. Commentary on recovery in the consulting business and strategic initiatives from the new management will be the key monitorable,” said Motilal Oswal.

5.Phillip Capital

The brokerage expects IT services CC revenue growth to be flat QoQ, within its guided range (-1 to +1 per cent QoQ in CC). “We expect BFSI & healthcare verticals to lead the growth, which will likely be offset by weakness in ENU. IT Services Margins are expected to remain stable in Q2,” said analysts.

Wipro's margin levers (utilization, suction, SG&A, offshore) are largely optimised, which, along with subdued growth, will make it difficult to expand margins. Q3FY25 guidance, consulting outlook, deal win to revenue conversion comments, vertical outlook, and margin outlook are among the key things to watch out for. The brokerage expects Wipro to guide for +1 per cent to +2 per cent CC growth rate for Q2.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, and not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.