Wipro Ltd. is a global information technology, consulting and business process services company. The company offers IT and IT-enabled services to clients across the globe. It was incorporated in 1945 and entered the IT sector in 1982. In 2000, it was listed in the New York Stock Exchange (NYSE) and entered the BPO business during the same year.
For the fifth consecutive year, the company was recognised as one of the world’s most ethical companies by the US-based Ethisphere Institute. The company ranks 362 in Forbes World’s Best Employer for the year 2018.
As of 10 October 2018, Wipro’s market capitalisation was over Rs.144,800 crore and is among the top IT solutions companies in India. The company is at the forefront of disrupting the technology sector by offering cutting-edge technology and services. The equity shares of Wipro are available for trading in the National Stock Exchange of India (NSE) and the Bombay Stock Exchange of India (BSE).
Before we invest in Wipro stocks, for an average investor, it’s necessary that the invested stock makes money and you’re ready to hold on to the stock even if it’s selling at a higher price. It’s best to analyse the financial performance of Wipro Ltd. before investing in its shares. Let’s review the recent performance of Wipro and analyse how the company has delivered.
Wipro Ltd. Financial Performance
In-line with estimates, the Q1 FY19 results of Wipro Ltd.’s consolidated net profit rose by 8.2% to stand at Rs.1,951 crore quarter-on-quarter and its consolidated revenue was up by 1.5% quarter-on-quarter, and 2.6% year-on-year to stand at Rs.13,978 crore. However, EBIT was down by 4.3% to stand at Rs.2,001 crore quarter-on-quarter, while the EBIT margin declined to 87bps quarter-on-quarter to come in at 14.3%.
Revenue for the financial year ending 31 March 2018 came in at Rs.54,635.9 crore as against Rs.55,417.9 crore reported during the previous fiscal year. The company reported that its revenue was down due to the impact of exchange rate fluctuations. Profit After Tax (PAT) for the said fiscal stood at Rs.8,008.1 crore as compared to Rs.8,489.5 crore posted in the year-ago period. The PAT came in after considering insolvency of two customers and impairment loss to the tune of Rs.525.5 crore. During the fiscal, the company announced an interim dividend of 50%.
For the quarter ending 31 March 2018, the company’s consolidated net profit was down by 6.9% quarter-on-quarter to stand at Rs.1,803 crore. Revenue for the said fiscal was disappointing with a mere
growth of 0.7% quarter-on-quarter to come in at Rs.13,768 crore. EBITDA declined by 1.6% quarter-on-quarter to stand at Rs.2,453 crore. The EBITDA margin for the financial year contracted by 50bps quarter-on-quarter to come in at 17.8%. Despite a disappointing result for the said quarter, the company’s IT services revenue inclined by 2.4% quarter-on-quarter to stand at $2,062 million.
Wipro Stock Price Trend in 2018
The Wipro stock trend during the January-March period has not been very encouraging from an investor’s point of view as it lost about 25 points during the said period. The scrip dropped another 40 points during the period from April to June; however, it recovered significantly towards the end of September to touch a record high of Rs.335.30 gaining as many as 80 points.
The rise in the stock price is attributed to the robust Q1 FY19 results where the company reported its consolidated net profit rose by 8.2% and revenue by 1.5% quarter-on-quarter. While the results for the quarter ending 31 March 2018 was disappointing, the company rebounded with better than expected results for the quarter ending 30 June 2018.
The trend in the stock price of Wipro during the period between July to September has been more than encouraging for both as an investor and from a shareholder’s point of view. The company has been quite unfortunate to some a certain extent in the back of the insolvency of a couple of customers and challenges in acquired entities. That said, it’s not all that bad for the IT company with the management predicting a better than expected Q2 FY19 results. This was backed by the CEO that the continued strength in the high growth digital business coupled with recent deal wins will help the company offset the headwinds.
Are Wipro Stocks Worth Investing?
While as a stock investor its imperative to research before investing in any stocks as they are subject to several terms and conditions, the current undervaluation of Wipro shares could be an indication that time is ripe to buy Wipro shares to increase your knowledge about Wipro. The IT company is India’s third-largest IT services exporter and there is a good possibility that the company will push more investments to increase its revenue in line with other IT service providers. This is more evident with Wipro’s commitment towards top-line growth.
Wipro’s solid profitability along with limited reinvestment requirements and the creation of separate entities of its non-IT businesses is expected to increase the company’s cash flow, which will aid the growth of the firm.
Thoughts About Wipro Shares
Wipro Ltd. has several decades of industry experience and a huge wealth of loyal customers that depend on the company to offer business-critical processes and IT services. Also, Azim Premji, who holds more than 75% of the company’s shares, is widely known as the most influential business leaders across the globe. He’s known for this fair business practices and committed to social causes such as public education.
The IT industry is known for its competitiveness and is always dynamic. Wipro needs to be at the forefront in disrupting the IT sector, which will keep it relevant in the market. That said, the management team led by CEO Abidali Z. Neemuchwala is seen as a strong leadership team which is looking to take the IT company to the next level in technology and IT services.
The contents of this post/blog does not constitute financial or other professional advice nor does it imply in any manner a principal-agent relationship, and is not a professional advice on a specific financial matter.