Wipro
Wipro reported a good third quarter fiscal 2015 result. Non-GAAP constant currency IT services revenue rose 3.7% to $1.836 billion, toward the top end of guidance ($1.808 billion to $1.842 billion).
The company noted that it continues to see opportunities across its key North American and European markets. In particular, the firm saw a recovery in demand for the retail and manufacturing sectors, while the banking and financial services sector sustained strong demand.
With the recent plunge in oil prices, Wipro issued a cautious short-term outlook for its oil and gas business (the energy and utilities vertical is roughly 16% of group revenue). Given the company’s diversified portfolio, however, we expect the overall impact to be muted.
For the quarter, total revenue (includes product revenue) grew 6% to Rs 119.9 billion ($1.9 billion) year over year. By practice, global infrastructure services and business process outsourcing were the standout growth areas. In order to drive growth, Wipro remains focused on building its digital offerings to meet new social, mobile, analytics, and cloud (SMAC) requirements. In addition, the company is seeking to further leverage open-source data and artificial intelligence to drive innovation and cost rationalisation. Recent SMAC deals with pharma and financial services companies set a good precedent for growth in this area.
We think Wipro remains entrenched in the IT services market and expect the firm to continue to build upon its geographic presence and domain expertise. Top-line growth will be a key focus for management going forward and we believe the firm will look for merger and acquisition opportunities to bolster its competitive position.
Moat: Narrow
Stewardship: Standard
Fair value: Rs 615
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