Wipro hits 52-week low; stock down 18% in 1 month on tepid Q1FY23 guidance

Shares of Wipro hit a fresh 52-week low of Rs 484, down 3 per cent on the BSE in Friday's intra-day trade, extending their fall of the past five days. The stock has dropped 7 per cent during the period after the company reported a disappointing margin for March quarter (Q4FY22).

Going forward, the company has given a tepid guidance of 1 per cent to 3 per cent quarter on quarter (QoQ) in constant currency (CC) terms growth in Q1FY23, which translates into revenues of $2,748 million to $2803 million.

The stock of the information technology (IT) software & consulting company has fallen below its previous low of Rs 477.80, touched on May 4, 2021. In the past one month, it has slipped 18 per cent as compared to 7.7 per cent decline in the S&P BSE Sensex.

Wipro's net profit rose 3.85 per cent year-on-year (YoY), and 4 per cent sequentially, to Rs 3,087 crore in Q4FY22. Revenue for the quarter was up 28 per cent YoY at Rs 20,860 crore from the previous year's Rs 16,245 crore. In dollar terms, the company reported IT services revenue at $2.72 billion, up 3 per cent sequentially. Earnings before interest and margin (EBIT) of IT Services contracted 60 basis points QoQ to 17 per cent.

Wipro mentioned that there has been a structural change in deals in the market where clients are breaking large deals into medium deals, which is baked in this guidance.

"The company maintained EBIT margin guidance of 17-17.5 per cent for the medium term but also mentioned that margins would be under pressure for the next three to four quarters. The company mentioned that they have increased frequency of promotions for 70 per cent of the employees to a quarterly basis," ICICI Securities said in a result update.

Emkay Global Financial Services, meanwhile, has cut FY23/FY24 EPS estimates by 6.1 per cent/4.7 per cent, factoring in weak Q4 and near-term margin pressures.

"A simplified organization structure, empowered GAEs and investments into sales and capabilities should drive revenue growth acceleration. “We believe the recent stock price correction has captured potential volatility in the operating performance during the early period of the restructuring exercise more than adequately," the brokerage firm said in its result update.