27 July 2013
1Q4FY14 Results Update | Sector:
Technology
Wipro
BSE SENSEX
19,748
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
5,886
WPRO IN
2,460.9
940/15.8
418/290
4/7/11
CMP: INR382
TP: INR470
Buy
In-line; 2Q guidance, deal signings and commentary positive
Operationally in-line:
Wipro’s 1QFY14 revenues at USD1,588.3m, IT Services EBIT
margin at 20% and overall EBIT margin at 18.1% (excluding forex gains) were in
line with our estimates. PAT at INR16.2b was above our estimate of INR15.7b on
higher other income (INR2.9b v/s our estimate of INR2.2b).
CC revenue growth in upper half of guided band:
In constant currency (CC)
terms, revenues grew 1.2% QoQ (v/s our estimate of 0.9% QoQ) to USD1,604m,
and at the higher end of the guided band of USD1,575m-1,610m. IT Services EBIT
margin was in line with our estimate, despite currency rates being more
favorable. The offset came primarily from higher S&M spends, which increased to
7.1%, v/s our estimate of 6.4% (flat QoQ).
Guidance positive:
The company’s guidance of 2-4% QoQ growth in USD
revenues for 2Q was above our expectation of 1-3% QoQ growth. The better than
expected guidance comes on the back of successful closure of some large deals in
the quarter and improved macro sentiment in the US.
APAC and E&U drive growth:
Growth during the quarter was driven by APAC
(~10% QoQ CC, 12% of revenues). Among verticals, Energy & Utilities (E&U) grew
5% QoQ CC (16% of revenues). While growth in 1Q was lopsided, from 2Q,
growth is likely to be more broad-based.
Upgrading revenue estimates marginally; valuations attractive:
We have revised our
USD revenue growth estimate to 6.4% (v/s 5.5% earlier) for FY14 and our FY15
estimates are unchanged. Wipro offers healthier upside relative to its top-tier peers.
Our target price of INR470 discounts FY15E EPS by 15x, implying 23% upside.
Financials & Valuation (INR B)
Y/E MAR
Net Sales
EBITDA
PAT
EPS (INR)
Gr.(%)
BV/Sh(INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
2013 2014E 2015E
374.3
83.7
61.4
25.0
17.3
115.6
21.6
15.9
15.3
3.3
416.4
89.9
71.1
29.0
15.9
136.1
23.0
18.6
13.2
2.8
451.3
95.3
76.6
31.2
7.7
158.0
21.2
17.9
12.2
2.4
Ashish Chopra
(Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Siddharth Vora
(Siddharth.Vora@MotilalOswal.com); +91 22 3982 5419
Investors are advised to refer through disclosures made at the end of the Research Report.

Wipro
1QFY14: Operationally in line; PAT above estimate on higher other income
Wipro’ 1QFY14 IT Services revenues at USD1588.3m grew 0.2% QoQ (in line with
our estimate of USD1,590m, +0.3% QoQ) and guidance of USD1,575-1,610m.
Revenue growth in constant currency was 1.2% to USD1,604m, and at the higher
end of the guided band (and in line with our estimate of 0.9% QoQ).
Constant currency revenue growth was in line and in the upper half of guided
Source: MOSL, Company
In IT Services (excluding Info-crossing, BPO, India and Middle East), revenues
grew faster at onsite, +2.4% QoQ, while revenues at offshore grew by 0.5%
QoQ.
Overall INR revenue was INR97.29b, +1.3% QoQ (v/s est. of INR98.5b), slightly
lower despite higher currency realization, as IT Products revenues declined 14%
YoY, v/s our estimate of growth of 8% (delta of ~INR2b).
Overall EBIT margin was 18.2%, +40bp QoQ (in line). IT Services EBIT margin
was 20.1%, -10bp QoQ, and in line with our estimate, despite a more favorable
currency (INR56.26 v/s assumption of INR55 – due to hedges in the top line).
The offset came primarily from higher S&M spend, which increased to 7.1%, v/s
our estimate of 6.4% QoQ (flat QoQ).
Investments in S&M yet to drive revenues
S&M (IT Serv)
220
200
180
160
140
120
100
USD revenues
Source: MOSL, Company
Profit after tax was INR16.2b, growth of 3% QoQ, marginally higher than our
estimate of INR15.73b, -0.2% QoQ. Higher PAT was on account of above-
estimate other income at INR2.9b, v/s our estimate of INR2.2b. 1QFY14 EPS was
INR6.6 (v/s est. of INR6.4).
27 July 2013
2

Wipro
IT EBIT margin in line
Utilization remained stable QoQ, remains key margin lever
Source: Company, MOSL
Source: Company, MOSL
Guidance of 2-4% QoQ on the back of healthy deal signings
Wipro guided for 2QFY14 revenues of USD1,620m-USD1,650m, growth of 2% to
+3.9% QoQ, ahead of our expectation of +1-3% QoQ growth. We were earlier
modeling 2.0% QoQ growth in IT Services revenues in 1QFY14, now revised
upwards to 3% QoQ.
The company’s outlook in the previous quarter of an uptick in demand
environment in 1Q has played out. Wipro is seeing higher confidence among
clients on the backdrop of positive macroeconomic developments, particularly
in the US. The company saw a pickup in large deal closures which has reflected
in strong order book in the current quarter.
Actual performance has at best been at midpoint of guidance in 4 out of the past 6
quarters
Source: Company, MOSL
Energy & Utilities the key growth vertical; APAC drove growth among key
geographies, Top 10 clients returns to growth
Among verticals, growth during the quarter came from Energy & Utilities(3.5%
QoQ) and Finance Solutions(0.8%). While weakness in Hitech & Manufacturing (-
0.8%QoQ) and Global Media & Telecom(-1.1%) continues to be a drag on
company revenues with second consecutive quarter of decline.
27 July 2013
3

Wipro
Energy & Utilities and Finance solutions were the key growth verticals
Verticals
Global Media and Telecom
Finance Solutions
Manufacturing and Hi-Tech
Healthcare, Life Sciences and Services
Retail and Transportation
Energy and Utilities
Contribution to
Rev. (%)
13.6
26.5
19.1
9.8
15.1
15.9
Growth - QoQ Contr to incr. rev
(%)
(%)
(1.1)
(85.5)
0.8
125.6
(0.8)
(80.0)
(2.8)
(138.8)
(0.4)
15.1
3.5
263.6
Source: MOSL, Company
Among Services Analytics continues to gain momentum for the company
growing 5.8% QoQ, IMS(-0.9%QoQ) showed a decline after three consecutive
quarters of growth.
Analytics the driver of growth among services
Services
Technology Infrastructure Services
Analytics and Information Management
Business Application Services
BPO
Product Engineering and Mobility
ADM
Contribution to
Rev. (%)
24.2
7.5
31.3
8.8
7.5
20.7
Growth - QoQ Contr to incr. rev
(%)
(%)
(0.9)
(124.4)
5.8
205.6
(0.1)
(18.2)
0.5
8.8
0.2
7.5
-0.2
20.7
Source: Company, MOSL
Among geographies, growth was driven by Europe (1.9%QoQ) and APAC &
Other Emerging Markets (4.4%QoQ) while US was weak(-0.7%QoQ) this quarter
the company is seeing increased traction and expects US to drive growth in
coming quarters.
Growth driven by RoW among geographies
Geographies
US
Europe
India & Middle East business
RoW
Contribution to
Rev. (%)
49.7
29
8.8
12.5
Growth - QoQ Contr to incr. rev
(%)
(%)
(0.7)
(148.4)
1.9
276.7
(6.2)
(288.4)
4.4
260.2
Source: Company, MOSL
Growth was driven from Top10 clients this quarter with the top client
registering 3% QoQ growth and top 2-5 clients growing 5.5% QoQ.
Client mining continues to be the focus for growth
Clients
Top Client
Top 2-5
Top 6-10
Non-top 10
Contribution to
Rev. (%)
3.7
10
8.8
77.5
Growth - QoQ
Contr to incr.
(%)
rev (%)
3.0
53.2
5.5
257.7
0.2
8.8
(0.6)
(219.7)
Source: MOSL, Company
27 July 2013
4

Wipro
Key takeaways from Management Commentary
Expect broad based growth:
While revenue growth during the quarter was
lopsided, expect growth to be more broad-based going forward. Substantial
portion of the 6 verticals should fire going forward.
IMS will be a driver of growth:
While the new technologies like collaboration,
mobility, cloud and analytics are growing faster, overall company revenue
growth will continue to be driven by traditional services like IMS and Application
Management. The company is actively pursuing deal renewals, and 50% of the
IMS pipeline are from the renewal space in the next 12 months.
Margins at current currency:
Despite currency remaining weak, Wipro is not
seeing pressure on pricing. Pricing is very competitive, however, in new deals.
However, the company will remain invested in the front end, and the margins
are expected to remain in a narrow band going forward.
Immigration Bill:
Customers are not particularly worried about the bill just yet,
while they remain interested in the developments. Customers are not
withholding spends because of the immigration Given the ongoing bilateral
dialogues at the political level between India and US and the political
characteristics in the US, the company does not expect the final version of the
bill, if any, to be as draconian.
Vertical-wise outlook:
Within investment banking, discretionary spend remains
under pressure. Opportunity is around two areas – cost takeout and regulatory
compliance and changes. Vendor consolidation is another initiative in play.
Energy & Utilities segment is clearly seeing large deals, and while there are
some deals pick-up in Telecom as well, the nature of work is Systems
Integration.
We were earlier modeling 5.5% growth in USD revenues for FY14. That implied
2% CQGR over 2Q-4QFY14. We have revised upwards our growth estimate to
6.4% in FY14 on the back of [1] guidance of 2-4% QoQ growth in 2QFY14, v/s our
earlier estimate of 2% QoQ growth, [2] healthy order wins during the quarter
lending greater comfort on growth and [3] improving macro scenario in the US.
Our USD revenue growth estimate of 9% in FY15E remains unchanged.
Our margin estimates of 21% in IT Services in FY14 and FY15 are unchanged.
However, while our EPS estimate for FY14 is higher by 1% driven by higher
revenue estimate and other income in 1Q, FY15E EPS is down by 0.5% on
assumption of higher tax rate following the management’s commentary (22.5%
in FY15 v/s 21% earlier). We now estimate FY14 EPS at INR29 and FY15EPS
estimate is INR31.4.
Revised
Earlier
FY14E
FY15E
57.0
56.5
6,561
7,144
417,434 452,193
18.9%
19.1%
21.0%
21.1%
28.6
31.4
Change
FY14E
FY15E
0.3%
0.0%
0.8%
0.9%
-0.3%
-0.2%
31bp
-6bp
5bp
-38bp
1.3%
-0.5%
Source: MOSL
5
Change in Estimates
Change in Estimates
FY14E
57.2
6,614
416,386
19.3%
21.1%
29.0
FY15E
56.5
7,211
451,323
19.0%
20.8%
31.2
INR/USD
USD Revenue - m
INR revenue - m
EBIT Margin - Overall
EBIT Margin - IT Services
EPS - INR (IT Serv and Products)
27 July 2013

Wipro
Valuation and view
We expect Wipro to grow USD revenues at a CAGR of 8% over FY13-15 and EPS
(ex de-merged business) at a CAGR of 12% during this period. The stock
currently trades at 13x FY14E and 12x FY15E EPS.
Our expectation of much improved growth rate at Wipro comes on the back of:
[1] bottoming out of revenue declines in several of its weak spots – Hi-tech,
Telecom OEM, Product engineering and IMS in India, [2] Return of deal closures
during the quarter and visibility lent by improvement in order book and [3]
continued traction in global IMS, where we expect Wipro to participate, given its
scale.
We believe that Wipro offers a healthier upside relative to its top-tier peers. Our
target price of INR470 discounts FY15E EPS by 15x, implying 23% upside.
Other result highlights
Revenue mix shifted in favor of onsite by 50bp QoQ to 53.9%
Revenue from Fixed Price contracts decreased by 70bp QoQ to 47.4%
The company added 28 new customers during the quarter, on the back of 52
customers in the previous quarter. Wipro closed the quarter with 946 active
clients v/s 978 clients in 4QFY13
Hedge book stands at USD1.9b as on March 31, 2013, v/s USD2.1b at the end of
previous quarter.
Headcount addition at 1,469 (net) (v/s est. of 1,765)
Net utilization including trainees at 71.4%, -30bps QoQ.
Voluntary Quarterly Annualized attrition at 13% (v/s 12.5% in 4QFY13). TTM
attrition (comparable to other IT services attrition reporting) at 13.2% v/s 13.7%
in 4QFY13
QoQ USD rev. growth comparison - %
Wipro
Industry
BFSI
Manufacturing
Retail
Telecom
Services
ADM
IMS
BPO
Region
US
Europe
0.8
-0.8
-0.4
-1.1
-0.2
-0.9
0.5
-0.7
1.9
Infosys
2.1
4.1
5.4
-6.1
1.6
4.8
5.7
9.3
1.7
TCS
2.9
2.9
8.8
7.5
3.9
2.4
3.2
5.9
6.9
Source: Company, MOSL
27 July 2013
6

Wipro
Wipro: an investment profile
Company description
Wipro is the third largest Indian IT services company
and the largest third-party BPO operator in India. It is
the largest third-party R&D services provider globally,
employing over 147,000 employees. It offers among the
widest range of IT and ITeS services and its corporate
governance and transparency are at the highest level in
the industry.
Recent developments
Won a major, multi-year deal from a leading
provider of analytics solutions to Healthcare, CPG
and Retail industries
Wipro has won a large multi-year deal in the
infrastructure management space from a large
global bank.
Valuation and view
Key investment arguments
It is the largest player in infrastructure
management services (IMS), the fastest growing
service line for Indian IT companies.
It has a strong presence in domestic and emerging
markets, growing ahead of developed markets.
Post restructuring, company has seen impressive
mining of large clients to increase its number of
customers in the higher contribution buckets
(USD100m+ clients up from 1 to 10 in 2 years).
We expect Wipro to grow its USD revenue at a
CAGR of 8% over FY13-15E and EPS at a CAGR of
12% during this period
Valuations at 13x FY14E and 12x FY15E EPS.
Maintain Buy with a target price of INR470.
Sector view
Key investment risks
Risk pricing in FPP projects could go wrong (47.4%
revenues from FPP in 1QFY14).
Margin recovery will be hit if growth challenges
persist over the medium term.
Persistence of weak macroeconomic fundamentals
across geographies have been driving deceleration
in growth for Indian IT services. Indicators from US
are turning positive, but it is too early to be
construed as a trend
Demand fundamentals however, are being
overridden by the potential business model
changes that the industry will be compelled to
undergo, if the immigration bill is passed in current
form.
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
29.0
31.2
Consensus
Forecast
27.1
29.6
Variation
(%)
6.8
5.4
Comparative valuations
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
Wipro
13.2
12.2
2.8
2.4
1.8
1.6
9.4
8.4
Infosys
17.0
15.3
3.6
3.1
2.9
2.5
11.0
9.6
TCS
20.5
18.1
6.9
5.5
4.3
3.7
14.7
13.0
Target price and recommendation
Current
Price (INR)
383
Target
Price (INR)
470
Upside
(%)
22.7
Reco.
Buy
Shareholding pattern (%)
June-13
Promoter
Domestic Inst
Foreign
Others
73.5
4.6
10.3
11.6
Mar-12
78.3
3.3
10.0
8.4
June-12
78.4
3.5
9.3
8.9
Stock performance (1-year)
27 July 2013
7

Wipro
Financials and valuation
27 July 2013
8

Wipro
NOTES
27 July 2013
9

Wipro
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WIPRO LTD
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10