Mon. Sep 28th, 2020

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Wipro soars as June quarter earnings better than expected

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Shares of Wipro Ltd surged over 13% on Wednesday following better-than-expected June quarter earnings from the company even as the pandemic-induced crisis continued to take a toll on operations.

The stock hit a high of 254 on the BSE, up 13.1% from its previous close. India’s benchmark Sensex was up 1.2% at 36467.36 points.

Wipro reported a 3% sequential rise in net profit to 2,411 crore for the June quarter. According to analysts polled by Bloomberg, net profit was estimated at 2,069 crore.

Total revenue fell 5.3% to 14,922 crore, again higher than the estimated 14,414 crore. IT service margin expanded to 19% from 16.1%. Operating profit rose 1.3% to 2,573 crore.

Operating margin expanded 140 bps on a sequential basis and by 60 bps year-on-year. Variable pay cuts, improvement in offshore rate, rupee depreciation, and automation led to improved margins.

As expected, Wipro did not guide for revenue growth for the second quarter of fiscal 2021 due to the uncertainties because of the covid-19 pandemic. However, it said revenue visibility for Q2 is much better than that at the start of Q1. Also, MD & CEO Thierry Delaporte, alluded to profitable growth being top priority.

“We have long held a negative view on Wipro for its uninspiring growth over the last decade. However, margins had begun to surprise on the upside for the past few quarters. If growth comes back, that could be a recipe for significant PE multiple expansion in a significantly under-owned stock. But we have been waiting for that for a long time. It remains to be seen if the new CEO can light the spark. There could be an additional kicker from a potential share buyback which may happen post September 2020”, said brokerage firm Nirmal Bang in a report.

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