Wipro Ltd. Absolute : REDUCE Relative : BENCHMARK · 2018-04-30 · Wipro Ltd. (WPRO) reported...

April 26, 2018 Analysts: Abhishek Shindadkar ([email protected], +91 9619 137 983, +91 22 43320643) of 16

Before reading this report, you must refer to the disclaimer on the last page.

Wipro Ltd. Absolute : REDUCE

Relative : BENCHMARK

4QFY18 Result: Estimate (), PT (), Rating() Regular Coverage 4% ATR in 11 Months

Back to square one. Retain REDUCE IT Services

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 288

Target Price (Rs) 290

Target Date 31st Mar '19

Target Set On 25th Apr '18

Implied yrs of growth (DCF) 5

Fair Value (DCF) 253

Fair Value (DDM) 72

Ind Benchmark BSE IT

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 1,303,794

Free Float (%) 25.68 %

52 Wk H/L (Rs) 334.75/244.2

Avg Daily Volume (1yr) 3,263,112

Avg Daily Value (Rs Mn) 932

Equity Cap (Rs Mn) 9,048

Face Value (Rs) 2

Bloomberg Code WPRO IN

Ownership Recent 3M 12M

Promoters 74.3 % 0.0 % 1.1 %

DII 7.1 % 0.4 % 0.0 %

FII 9.3 % -0.5 % -0.9 %

Public 9.3 % 0.1 % -0.1 %

Price % 1M 3M 12M

Absolute 1.2 % -7.6 % 16.6 %

Vs Industry -8.4 % -12.8 % -20.4 %

INFY -1.0 % -1.7 % 24.4 %

TCS 22.9 % 11.0 % 49.9 %

Consolidated Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) 4.6 4.8 4.3 4.0

EPS (18E) 4.1 4.4 4.6 4.9

Wipro Ltd. (WPRO) reported decent revenue growth in 4QFY18 but margins missed

estimates and guidance was weak. IT services constant currency revenues grew

1.1% (lower end of 1-3% guidance) vs. 1% EE, while US$ revenues were marginally

ahead (2.4% vs. 2%). Consolidated EBITDA margins declined 42bps qoq while

reported/adjusted IT services EBITM declined 40bps/120bps qoq to 14.4%/16%,

respectively. Noticeably, 1QFY19E guidance (-2.3% to 0.1% qoq growth), led by the

impact of client-specific challenges, suggests loss of momentum and that growth

could significantly lag peers. We are trimming estimates sharply and maintain

REDUCE rating with a Mar’19 TP of Rs 290, set at 16x Mar’19 TTM EPS of Rs 18.0. Portfolio challenges overwhelm constructive FY19E commentary shared

previously: WPRO was hoping to exit 4QFY18 with industry-average growth led by

(a) strong traction in the banking & financial services segment, and (b) momentum

in the digital business, which contributed 26.7% (3Q: 25%) of overall revenues and

grew 9% qoq. Exit rate coupled with abating portfolio challenges could have

helped achieve closer to industry average growth in FY19e. However, relapsing

portfolio and client specific challenges raises the asking rate. Consequently, we

trim our FY19E revenue estimates (2.4% yoy growth vs. 4.5% earlier), which in-turn

leads to meaningful cut in EBITDA/PAT estimates. BFSI & Europe continue to drive growth: 4QFY18 growth was led by BFSI (3% qoq

CC growth), manufacturing (2.9%), E&U (1.6%) and healthcare (0.6%) segments,

while communications (-8.1%) and consumer (-1%) dragged. In terms of geography,

Europe (2.7%) and Americas (1.6%) growth was offset by India and Middle East (-

2.9%), and APAC (-1.2%). Growth across services was led by product engineering

(7.4% qoq-CC), IMS (3.4%) and analytics (1.7%), while application services (-0.3%)

and BPO (-2.5%) were weak. Top client growth encouraging: Top customer revenues grew 27.3% yoy (3Q:

17.1%) while top 2-5 grew 24.8% yoy (3Q: 20.5%) and likely reflects improving win

rates and mining initiatives. Top 6-10/non top 10 customer revenues

declined/grew 0.6%/3.6% yoy and 2.4%/1.7% qoq, respectively. Retain REDUCE on portfolio concerns: Client-specific issues have overwhelmed

management execution along a well-articulated strategy, while commentary

suggests 1HFY19 could be tepid. Further, relapsing portfolio could delay growth

acceleration and influences our REDUCE rating. Key upside triggers could be

earlier-than-anticipated recovery in healthcare, conclusion of client-specific

challenges, and margin expansion.

Change in estimates:

Revised Estimates % Change

FY19E FY20E FY19E FY20E

Sales ($ Mn) 8,513 8,843 -2% -4%

Sales 561,844 583,631 -2% -4%

EBITDA 104,930 110,605 -10% -11%

EBIT 82,318 87,407 -13% -13%

PAT 81,413 86,257 -14% -16%

EPS 18.0 19.1 -7% -9%

Consolidated Financials

Rs. Mn YE Mar FY18A FY19E FY20E FY21E

Sales 544,871 561,844 583,631 610,198

EBITDA 103,928 104,930 110,605 116,100

Depreciation 21,122 22,612 23,198 24,103

Interest Expense 5,629 4,881 4,817 5,076

Other Income 25,286 24,716 25,758 26,874

Reported PAT 80,070 81,413 86,257 90,614

Recurring PAT 80,070 81,413 86,257 90,614

Total Equity 482,936 515,362 549,891 586,054

Gross Debt 138,259 121,327 127,994 134,662

Cash 294,019 345,868 395,090 444,300

Rs Per Share FY18A FY19E FY20E FY21E

Earnings 17.7 18.0 19.1 20.0

Book Value 99 114 122 130

Dividends 1.1 9.0 9.5 10.0

FCFF 17.8 21.7 21.1 21.8

P/E (x) 16.3 16.0 15.1 14.4

P/B (x) 2.9 2.5 2.4 2.2

EV/EBITDA (x) 11.2 10.7 9.8 9.0

ROE (%) 16 % 16 % 16 % 16 %

Core ROIC (%) 19 % 19 % 21 % 22 %

EBITDA Margin (%)

19 % 19 % 19 % 19 %

Net Margin (%) 15 % 14 % 15 % 15 %

mailto:[email protected]

Wipro Ltd. Absolute – REDUCE Relative – BENCHMARK 4% ATR in 11 Months

April 26, 2018 Analyst: Abhishek Shindadkar ([email protected], +91 9619137983, +91 22 43320643) of 16

Exhibit 1:4QFY18 revenues at lower end of the guided range

Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18

Guidance($mn) 1916-1955 1922-1941 1915-1955 1962-2001 2014-2054 2033-2073

Revenue Realized($mn) 1903 1955 1972 2014 2013 2062

Guidance restated

(actual currency $ mn) 1891-1930 1941-1960 1927-1967 1999-2038 1996-2036 2060-2100

Guidance quartile MISS Beat Beat Beat In-line In-line

Source: Company, Equirus Securities

Exhibit 2(a): Decent client transitions across buckets

Client distribution change 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

$100 M+ 1 0 0 0 0 -1

$75 M+ -2 1 0 -2 1 3

$50 M+ 0 1 2 3 2 -2

$20 M+ -1 1 -1 0 0 5

$10 M+ -1 -7 0 7 -3 4

$5 M+ 6 4 -6 8 2 5

$3 M+ 8 5 3 13 -6 5

$1 M+ 5 26 22 3 8 -4

Total Change 16 31 20 32 4 15


Exhibit 2(b): Top customer leads quarterly growth

Revenue (Rs mn) 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Top Client 50 53 57 57 62 62 72

QoQ Growth 3.2% 6.9% 6.4% 0.9% 9.2% 0.0% 15.7%

Top 2-5 Client 144 137 139 146 159 165 173

QoQ Growth -4.6% -4.7% 1.3% 5.1% 9.0% 3.8% 4.9%

Top 6-10 Client 142 131 135 142 141 131 134

QoQ Growth 0.6% -7.4% 2.7% 5.3% -0.7% -7.2% 2.4%

Non-Top 10 Client 1,581 1,581 1,624 1,627 1,651 1,655 1,683

QoQ Growth -0.6% 0.0% 2.7% 0.1% 1.5% 0.2% 1.7%

New Customers added 47 108 51 45 41 79 58


Exhibit 3: Voluntary quarterly annualized attrition continues to increase

Attrition 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Voluntary Attrition (TTM) 16.3% 16.3% 15.9% 15.7% 15.9% 16.6%

Voluntary Qtrly Annualized 15.4% 14.8% 16.1% 16.7% 16.2% 17.5%


Exhibit 4: Growth compared to peers

2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Infosys $ rev growth % 3.4% -1.4% 0.7% 3.2% 2.9% 1.0% 1.8%

TCS $ rev growth % 0.3% 0.3% 1.5% 3.1% 3.2% 1.0% 3.9%

HCL Tech $ rev growth % 1.9% 1.3% 2.0% 3.7% 2.3% 3.1% NA

Average Tier 1 (ex-Wipro)$ growth % 1.9% 0.1% NA 3.3% 3.2% 1.3% 2.7%

Wipro IT svcs $ rev growth % -0.8% -0.7% 2.7% 0.9% 2.1% 0.0% 2.4%


Exhibit 5: Global Infra business recovers

Infra vs. Non-Infra QoQ 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Global Infra Services Growth 0.3% -1.1% 2.4% 1.2% 3.2% -0.7% 4.6%

Non-Infra Growth -1.2% -0.6% 2.9% 0.7% 1.7% 0.3% 1.6%


Exhibit 6: Marginal increase in DSOs sequentially

Particulars 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Account Receivable 107,375 94,846 97,954 99,887 100,000 100,990

Unbilled revenues 46,026 45,095 46,509 45,435 40,434 42,486

Total Receivables 153,401 139,941 144,463 145,322 140,434 143,476

LTM Revenues 546,851 550,402 550,671 547,248 547,060 544,871

DSO(incl.Unbilled) 102.4 92.8 95.8 96.9 93.7 96.1


Exhibit 7: Utilization improves sequentially

Utilization incl. trainees 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Wipro 80.2% 80.0% 81.9% 80.3% 81.8% 80.0% 82.4%

INFO 77.7% 77.8% 77.8% 80.2% 81.8% 81.8% 81.8%

TCS NR NR NR NR NR NR NR

HCL Tech* 85.3% 84.6% 85.7% 86.0% 86.0% 85.8% NA

Source: Company, Equirus Securities, Net Utilisation excluding support




Exhibit 8a: Key metrics

Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Consolidated Net Sales ($ Mn) 1,921 1,915 1,935 2,023 2,018 2,028 1,985 2,051 2,068 2,059 2,081 2,125

Growth (%) -0.1% -0.3% 1.1% 4.5% -0.3% 0.5% -2.1% 3.3% 0.8% -0.4% 1.1% 2.1%

Net Sales (Rs. Mn) 124,000 125,870 129,651 137,571 137,022 139,032 137,674 140,634 136,599 134,677 136,844 138,243

Growth (%) 1.7% 1.5% 3.0% 6.1% -0.4% 1.5% -1.0% 2.2% -2.9% -1.4% 1.6% 1.0%

IT Services Revenue (US$Mn) 1,794 1,832 1,838 1,882 1,931 1,916 1,903 1,955 1,972 2,014 2,013 2,062

Growth (%) 1.1% 2.1% 0.3% 2.4% 2.6% -0.8% -0.7% 2.7% 0.9% 2.1% 0.0% 2.4%

EBIT Margin 18.5% 19.0% 17.9% 17.4% 16.1% 15.8% 16.4% 14.3% 16.0% 16.8% 14.4% 13.7%

USD-INR realized rate 64.5 65.7 67.0 68.0 67.9 68.6 69.4 68.6 66.1 65.4 65.7 65.0

Utilization Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Excluding Trainees and support 81.9% 82.3% 78.0% 77.5% 79.7% 82.8% 81.9% 84.8% 82.1% 82.5% 81.9% 83.4%

Including Trainees (still excl. support) 79.4% 77.2% 73.8% 76.1% 78.8% 80.2% 80.0% 81.9% 80.3% 81.8% 80.0% 82.4%

Contract Type Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Fixed Price 54.5% 53.4% 55.9% 56.9% 56.0% 56.4% 57.7% 58.3% 58.2% 57.7% 57.7% 58.7%

Time & Materials 45.5% 46.6% 44.1% 43.1% 44.0% 43.6% 43.3% 41.7% 41.8% 42.3% 42.3% 41.3%





Exhibit 9: Service line performance

Service line split of revenues (%) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Technology Infrastructure Services 28.1% 28.9% 27.9% 28.2% 28.1% 28.0% 28.1% 28.4% 28.2% 28.8%

Wipro Analytics 7.4% 7.2% 7.4% 7.3% 7.0% 6.9% 7.1% 7.1% 7.0% 7.0%

Application Services 46.7% 45.3% 44.7% 43.8% 44.4% 45.7% 45.8% 45.5% 45.3% 44.8%

BPO 9.8% 10.6% 12.9% 13.4% 13.3% 12.3% 12.0% 12.1% 12.6% 12.1%

Product Engineering 8.0% 8.0% 7.1% 7.3% 7.2% 7.1% 7.0% 6.9% 6.9% 7.3%

Service line split of revenues ($ mn) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Technology Infrastructure Services 516.6 543.9 538.7 540.4 534.7 547.3 554.0 571.8 567.7 593.9

Wipro Analytics 136.0 135.5 142.9 139.9 133.2 134.9 140.0 143.0 140.9 144.3

Application Services 858.5 852.5 863.1 839.3 844.8 893.3 903.0 916.1 911.9 923.8

BPO 180.2 199.5 249.1 256.8 253.1 240.4 236.6 243.6 253.6 249.5

Product Engineering 147.1 150.6 137.1 139.9 137.0 138.8 138.0 138.9 138.9 150.5

Service line revenue growth yoy Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Technology Infrastructure Services 3.9% 9.9% 7.2% 5.4% 3.5% 0.6% 2.9% 5.8% 6.2% 8.5%

Wipro Analytics 8.2% 7.6% 6.2% 1.8% -2.1% -0.5% -2.0% 2.2% 5.8% 7.0%

Application Services -1.8% 0.1% 1.3% -2.1% -1.6% 4.8% 4.6% 9.2% 7.9% 3.4%

BPO 5.6% 19.6% 49.3% 43.0% 40.5% 20.5% -5.0% -5.1% 0.2% 3.8%

Product Engineering 15.4% 11.6% -0.8% -3.3% -6.8% -7.8% 0.7% -0.7% 1.4% 8.5%

Service line revenue growth qoq Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Technology Infrastructure Services 0.7% 5.3% -1.0% 0.3% -1.1% 2.4% 1.2% 3.2% -0.7% 4.6%

Wipro Analytics -1.0% -0.4% 5.4% -2.1% -4.8% 1.3% 3.8% 2.1% -1.4% 2.4%

Application Services 0.1% -0.7% 1.2% -2.7% 0.7% 5.7% 1.1% 1.5% -0.5% 1.3%

BPO 0.3% 10.7% 24.9% 3.1% -1.4% -5.0% -1.6% 3.0% 4.1% -1.6%

Product Engineering 1.6% 2.4% -8.9% 2.0% -2.1% 1.3% -0.5% 0.7% 0.0% 8.4%





Exhibit 10: Vertical performance

Vertical split (%) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Finance Solutions 26.2% 25.4% 25.6% 25.5% 25.5% 26.0% 26.7% 27.6% 28.5% 29.2%

Healthcare, Life Sciences & Services 12.0% 13.3% 15.3% 16.0% 16.0% 15.4% 14.8% 13.7% 14.0% 13.9%

Energy & Utilities 14.4% 14.0% 13.2% 12.9% 13.0% 13.1% 13.4% 13.5% 12.4% 12.5%

Communications 7.7% 7.7% 7.6% 7.5% 7.4% 6.9% 6.8% 6.5% 6.4% 5.8%

Consumer 16.5% 16.4% 15.8% 15.7% 15.8% 15.8% 15.8% 15.9% 16.0% 15.6%

Manufacturing and Hitech 23.2% 23.2% 22.5% 22.4% 22.3% 22.8% 22.5% 22.8% 22.7% 23.0%

Vertical / Domain ($ mn) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Finance Solutions 481.6 478.0 494.3 488.7 485.2 508.2 526.4 555.7 573.7 602.1

Healthcare, Life Sciences & Services 220.6 250.3 295.4 306.6 304.4 301.0 291.8 275.8 281.8 286.6

Energy & Utilities 264.7 263.5 254.9 247.2 247.4 256.1 264.2 271.8 249.6 257.8

Communications 141.5 144.9 146.7 143.7 140.8 134.9 134.1 130.9 128.8 119.6

Consumer 303.3 308.6 305.1 300.9 300.6 308.8 311.5 320.1 322.1 321.7

Manufacturing and Hitech 426.5 436.6 434.4 429.3 424.3 445.6 443.6 459.1 457.0 474.3

Vertical/Domain growth YoY Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Finance Solutions 4.4% 1.7% 2.8% -0.1% 0.7% 6.3% 6.5% 13.7% 18.2% 18.5%

Healthcare, Life Sciences & Services 5.0% 20.6% 47.0% 46.8% 38.0% 20.3% -1.2% -10.0% -7.4% -4.8%

Energy & Utilities -10.1% -4.2% -6.5% -8.2% -6.6% -2.8% 3.7% 10.0% 0.9% 0.7%

Communications - - 10.5% 3.2% -0.5% -6.9% -8.6% -8.9% -8.5% -11.3%

Consumer - - 5.0% 1.4% -0.9% 0.1% 2.1% 6.4% 7.1% 4.2%

Manufacturing and Hitech - - 4.4% 0.1% -0.5% 2.1% 2.1% 6.9% 7.7% 6.4%

Vertical/Domain growth QoQ Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Finance Solutions -1.5% -0.7% 3.4% -1.1% -0.7% 4.7% 3.6% 5.6% 3.2% 5.0%

Healthcare, Life Sciences & Services 5.6% 13.5% 18.0% 3.8% -0.7% -1.1% -3.1% -5.5% 2.2% 1.7%

Energy & Utilities -1.7% -0.5% -3.3% -3.0% 0.1% 3.5% 3.2% 2.9% -8.2% 3.3%

Communications 1.7% 2.4% 1.3% -2.1% -2.0% -4.2% -0.6% -2.4% -1.6% -7.2%

Consumer 2.2% 1.8% -1.2% -1.4% -0.1% 2.7% 0.9% 2.8% 0.6% -0.1%

Manufacturing and Hitech -0.5% 2.4% -0.5% -1.2% -1.1% 5.0% -0.5% 3.5% -0.5% 3.8%

Source: Company, Equirus Securities, Reclassification from June ‘16




Exhibit 11: Geographical performance

Geographical split of revenues (%) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Americas 52.8% 52.5% 53.5% 54.8% 55.5% 54.9% 54.5% 53.6% 53.1% 52.7%

Europe 24.8% 25.6% 25.4% 24.0% 23.6% 24.4% 24.2% 25.1% 25.9% 27.0%

India & Mid-East 11.0% 11.0% 10.4% 10.4% 10.0% 9.9% 10.4% 9.9% 10.0% 9.4%

APAC & Other Emerging Mkts. 11.4% 10.9% 10.7% 10.8% 10.9% 10.8% 10.9% 11.4% 11.0% 10.9%

Geographical split of revenues ($ mn) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Americas 970.6 988.1 1033.0 1050.1 1056.1 1073.1 1074.6 1079.2 1068.9 1086.7

Europe 455.9 481.8 490.4 459.9 449.1 476.9 477.2 505.4 521.4 556.7

India & Mid-East 202.2 207.0 200.8 199.3 190.3 193.5 205.1 199.3 201.3 193.8

APAC & Other Emerging Mkts. 209.6 205.1 206.6 207.0 207.4 211.1 214.9 229.5 221.4 224.8

Geographical revenue growth YoY Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Americas 5.2% 7.7% 9.7% 8.2% 8.8% 8.6% 4.0% 2.8% 1.2% 1.3%

Europe -8.0% 3.2% 6.8% -0.4% -1.5% -1.0% -2.7% 9.9% 16.1% 16.7%

India & Mid-East 17.3% 9.0% 5.6% 2.6% -5.9% -6.5% 2.1% 0.0% 5.8% 0.2%

APAC & Other Emerging Mkts. 2.4% 2.3% 1.9% 0.9% -1.0% 2.9% 4.0% 10.9% 6.8% 6.5%

Geographical revenue growth QoQ Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Americas 0.0% 1.8% 4.5% 1.7% 0.6% 1.6% 0.1% 0.4% -1.0% 1.7%

Europe -1.2% 5.7% 1.8% -6.2% -2.4% 6.2% 0.0% 5.9% 3.2% 6.8%

India & Mid-East 4.1% 2.4% -3.0% -0.8% -4.5% 1.7% 6.0% -2.8% 1.0% -3.7%

APAC & Other Emerging Mkts. 2.1% -2.1% 0.7% 0.2% 0.2% 1.8% 1.8% 6.8% -3.5% 1.5%





Exhibit 11: Top client performance

Top client contribution (%) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Top client (%) 3.2% 2.7% 2.5% 2.6% 2.8% 2.9% 2.9% 3.1% 3.1% 3.5%

Top 5 (%) 11.5% 11.0% 10.3% 10.1% 10.0% 10.0% 10.3% 11.0% 11.3% 11.9%

Top 10 (%) 19.3% 18.2% 17.6% 17.5% 16.9% 16.9% 17.5% 18.0% 17.8% 18.4%

Top 2-5 client 8.3% 8.3% 7.8% 7.5% 7.2% 7.1% 7.4% 7.9% 8.2% 8.4%

Top 6-10 client 7.8% 7.2% 7.3% 7.4% 6.9% 6.9% 7.2% 7.0% 6.5% 6.5%

Top Clients revenues ($ mn) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Top client (%) 58.8 50.8 48.3 49.8 53.3 56.7 57.2 62.4 62.4 72.2

Top 5 (%) 211.4 207.0 198.9 193.5 190.3 195.5 203.1 221.5 227.5 245.4

Top 10 (%) 354.8 342.5 339.8 335.4 321.6 330.3 345.0 362.4 358.3 379.4

Top 2-5 client 152.6 156.2 150.6 143.7 137.0 138.8 145.9 159.1 165.1 173.2

Top 6-10 client 143.4 135.5 140.9 141.8 131.3 134.9 142.0 140.9 130.8 134.0

Top clients growth YoY Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Top client (%) -13.8% -24.6% -18.5% -12.3% -9.4% 11.6% 18.5% 25.3% 17.1% 27.3%

Top 5 (%) -7.3% -7.4% -9.1% -9.7% -10.0% -5.6% 2.1% 14.4% 19.5% 25.5%

Top 10 (%) -5.9% -6.3% -5.8% -7.5% -9.4% -3.6% 1.5% 8.1% 11.4% 14.9%

Top 2-5 client -4.5% 0.0% -5.7% -8.8% -10.2% -11.2% -3.1% 10.7% 20.5% 24.8%

Top 6-10 client -3.8% -4.5% -0.6% -4.4% -8.4% -0.5% 0.7% -0.6% -0.3% -0.6%

Top clients revenue growth QoQ Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

Top client (%) 3.6% -13.6% -5.0% 3.2% 6.9% 6.4% 0.9% 9.2% 0.0% 15.7%

Top 5 (%) -1.4% -2.1% -3.9% -2.7% -1.7% 2.7% 3.9% 9.1% 2.7% 7.9%

Top 10 (%) -2.2% -3.5% -0.8% -1.3% -4.1% 2.7% 4.5% 5.0% -1.1% 5.9%

Top 2-5 client -3.2% 2.4% -3.6% -4.6% -4.7% 1.3% 5.1% 9.0% 3.8% 4.9%

Top 6-10 client -3.4% -5.5% 4.0% 0.6% -7.4% 2.7% 5.3% -0.7% -7.2% 2.4%





Earnings call takeaways

IT services revenue grew 2.4% in US$ terms and 1.1% in CC terms qoq.

Digital services (26.7% of revenues) grew 9% qoq. 4Q witnessed one of the highest

bookings in digital; WPRO closed ~70 deals of >US$ 5mn in TCV over last year.

4Q operating margins at 14.4% were hit by a provision of Rs 2.08bn towards

impairment loss and client insolvency, which together impacted margins by 1.6%

(client insolvency impacted margins by 1%).

WPRO generated operating cash flows of Rs 84bn in 4QFY18.

Client mining is performing well and there was an addition of two clients

transitioned to US$ 50mn-75mn bands.

Two accounts crossed US$ 250mn in annual revenue.

Bankruptcy of two clients with annual revenue run-rate over US$ 50mn impacted

margins in 4Q and could affect revenues in 1QFY19. However, the impact has been

factored in the revenue guidance.

HPS business witnessing clients exits Communication business continues to be weak.

The consumer vertical is stabilizing with opportunities for digital and hyper

automation.

Product engineering services momentum continues.

Growth trajectory could recover from 2QFY19 led by strong deal wins and order

bookings in FY18, coupled with strength in digital.

IP revenues crossed US$ 100mn for FY18.

HOLMES-based automation solutions are deployed via 92 unique bots for 320 WPRO

customers to deliver service improvement in the run, testing, business processes.

This helped generate additional productivity improvement worth 8,000 FTE (person

month) in FY18. Majority of FTEs are in the L2 bucket. The lowest end of the

pyramid is automated by robotics and AI. IP+AI helped increasing revenue per

employee by > 6% in the last four quarters.

Localization: US (>55%), Latam (100%) and APAC (75%).

Management continues to witness momentum in Wipro Ventures with 18 new

deployments in areas like threat management, conversational AI solutions etc.

Guidance: WPRO guided IT services revenue of US$ 2,015mn –2,065mn in CC terms

(excluding impact of divestment of data center business) for 1QFY19.




Quarterly performance, consolidated

(Rs mn) 4QFY18 4QFY18E 3QFY18 4QFY17 % Change

Comments 4QFY18E 3QFY18 4QFY17

Net Sales IT services ($ Mn) 2,062 2,053 2,013 1,955 0.4% 2.4% 5.5%

Net Sales IT Svcs & Prod. (Rs mn) 137,686 140,498 136,690 139,875 -2.0% 0.7% -1.6%

COGS (Excl Depreciation) 92,094 92,067 90,697 92,592 0.0% 1.5% -0.5%

SG&A Expense 21,064 19,147 21,064 19,103 10.0% 0.0% 10.3%

Total Expenditures 113,158 111,213 111,761 111,695 1.7% 1.2% 1.3%

EBITDA 24,528 29,285 24,929 28,180 -16.2% -1.6% -13.0%

Depreciation 5,700 5,286 5,279 8,179 7.8% 8.0% -30.3%

EBIT 18,828 24,000 19,650 20,001 -21.5% -4.2% -5.9%

Interest 1,564 1,198 1,205 1,053 30.5% 29.8% 48.5%

Other Income 5,360 4,268 6,259 10,463 25.6% -14.4% -48.8%

PBT 22,624 27,069 24,704 29,411 -16.4% -8.4% -23.1%

Tax 4,615 6,226 5,355 6,742 -25.9% -13.8% -31.5%

Recurring PAT 18,006 20,843 19,359 22,669 -13.6% -7.0% -20.6%

Extraordinaries -22 13 -12 58

Reported PAT 18,028 20,831 19,371 22,611 -13.5% -6.9% -20.3%

EPS (Rs) 3.7 4.3 4.0 4.7 -13.5% -6.9% -20.6%

EBITDA Margin 17.8% 20.8% 18.2% 20.1% -303 bps -42 bps -233 bps

EBIT Margin 13.7% 17.1% 14.4% 14.3% -341 bps -70 bps -62 bps

PBT Margin 16.4% 19.3% 18.1% 21.0% -284 bps -164 bps -460 bps

PAT Margin 13.1% 14.8% 14.2% 16.2% -173 bps -108 bps -307 bps

Tax Rate 20.4% 23.0% 21.7% 22.9% -260 bps -128 bps -252 bps





Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY19E 18.0 19.4 -7 % Consensus numbers before earnings.

FY20E 19.1 21.2 -10 %

Sales FY19E 561,844 581,692 -3 %

FY20E 583,631 622,074 -6 %

PAT FY19E 81,413 90,038 -10 %

FY20E 86,257 98,285 -12 %

Our Key Investment arguments:

Lower growth relative to peers. Energy growth could be impacted by customer

specific challenges.

Large part of portfolio (Energy, Telecom) remains in industries facing volatility.

Margin expansion could be limited due to customer-specific investments, and US

regulatory issues.

Key parameters FY18A FY19E FY20E FY21E

USD-INR rate 65.6 66.0 66.0 66.0

IT Svcs Revenue (US$Mn) 8,060 8,251 8,585 8,994

IT Svcs Revenue (Rs Mn) 528,410 544,572 566,583 593,588

IT Svcs overall HC 181,482 182,382 183,632 183,932

IT Svcs HC (excl. BPO, I&ME, IFOX) 122,232 122,232 122,432 122,532

Utilization incl. trainees (%) for Global IT Svcs. 71.3% 71.1% 72.2% 72.5%

IT Svcs Blended Pricing realization ($/manmonth) 7,673 7,843 8,034 8,379

BPO Revenue ($Mn) 983 1,099 1,125 1,152

EBIT Margin(%) 15% 15% 15% 15%

PBT Margin(%) 19% 18% 19% 19%

PAT Margin(%) 15% 14% 15% 15%

Risk to Our View: Oil price recovery leading to increase in E&U spends.

Key Triggers

Uptick in discretionary spending, large deals materialization, automation benefits,

Top accounts momentum.

Sensitivity to Key Variables % Change % Impact on EPS

Rupee Appreciation 1 % -40 bps

Utilization 1 % +50 bps

- - -

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.9 % 0.7 11.2 % 4.0 % 40.8 %

- FY19E FY20E FY21-23E FY24-28E FY29-34E

Sales Growth 3 % 4 % 3 % 7 % 9 %

NOPAT Margin 12 % 12 % 12 % 12 % 12 %

IC Turnover 1.66 1.75 1.85 1.85 1.85

RoIC 19.0 % 20.7 % 22.4 % 22.7 % 22.7 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 214 223 229 243 256

Valuation as of 31stMar ‘19 236 246 253 268 283

Based on DCF, assuming 10 years of 7% Sales CAGR growth and 23% average ROIC, we

derive current fair value of Rs. 243 and 31st Mar ‘19 fair value of Rs.268.

Company Description:

Wipro is the third largest Indian IT services provider, one of the best managed and

admired companies in India.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E

Wipro REDUCE 288 1,303,794 290 31st Mar '19 17.7 18.0 19.1 16.3 16.0 15.1 99.2 2.5 16 % 16 % 16 % 0.4 % 3.2 %

Infosys ADD 1,156 2,508,581 1,200 31st Mar '19 73.7 70.0 76.5 15.7 16.5 15.1 298.4 3.7 24 % 23 % 24 % 3.9 % 3.9 %

TCS ADD 3,466 6,654,779 3,308 31st Mar '19 134.9 150.4 160.7 25.7 23.1 21.6 444.7 6.6 30 % 31 % 28 % 1.5 % 1.6 %




Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E

Revenue 136,261 134,234 136,690 137,686 138,591 140,359 140,583 142,311 143,573 145,645 146,528 147,885 544,871 561,844 583,631 610,198

COGS (Excl Depreciation) 92,168 89,494 90,697 92,094 93,178 94,034 93,257 92,748 94,030 97,092 97,485 97,466 364,453 373,218 386,073 404,032

SG&A Expense 17,410 16,952 21,064 21,064 21,247 20,511 20,598 21,340 21,467 21,955 21,632 21,899 76,490 83,696 86,953 90,066

- - - - - - - - - - - - - - - - -

EBITDA 26,683 27,788 24,929 24,528 24,165 25,814 26,728 28,223 28,076 26,598 27,411 28,520 103,928 104,930 110,605 116,100

Depreciation 4,943 5,200 5,279 5,700 5,682 5,614 5,623 5,692 5,743 5,826 5,788 5,841 21,122 22,612 23,198 24,103

EBIT 21,740 22,588 19,650 18,828 18,483 20,200 21,104 22,531 22,333 20,772 21,623 22,678 82,806 82,318 87,407 91,997

Interest 1,474 1,386 1,205 1,564 1,238 1,217 1,214 1,211 1,208 1,208 1,203 1,198 5,629 4,881 4,817 5,076

Other Income 6,553 7,114 6,259 5,360 5,779 5,907 6,278 6,752 6,134 6,151 6,525 6,947 25,286 24,716 25,758 26,874

PBT 26,819 28,316 24,704 22,624 23,023 24,890 26,168 28,072 27,259 25,715 26,945 28,428 102,463 102,153 108,348 113,795

Tax 5,994 6,426 5,355 4,615 4,697 5,078 5,338 5,727 5,588 5,272 5,524 5,828 22,390 20,839 22,211 23,328

PAT bef. MI & Assoc. 20,825 21,890 19,349 18,009 18,327 19,812 20,830 22,345 21,671 20,443 21,422 22,600 80,073 81,314 86,136 90,467

Minority Interest 59 -22 -12 -22 -23 -24 -25 -27 -28 -29 -31 -33 3 -100 -121 -147

Profit from Assoc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Recurring PAT 20,766 21,912 19,361 18,031 18,350 19,837 20,855 22,372 21,699 20,473 21,453 22,633 80,070 81,413 86,257 90,614

Extraordinaries 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Reported PAT 20,766 21,912 19,361 18,031 18,350 19,837 20,855 22,372 21,699 20,473 21,453 22,633 80,070 81,413 86,257 90,614

EPS (Rs) 4.59 4.84 4.28 3.99 4.06 4.38 4.61 4.95 4.80 4.53 4.74 5.00 17.70 18.00 19.07 20.03

Key Drivers

IT Services Revenue ($Mn) 1,972 2,014 2,013 2,062 2,037 2,059 2,062 2,093 2,113 2,142 2,152 2,178 8,060 8,251 8,585 8,994 US$-Rs. Exchange Rate 66.1 65.4 65.7 65.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 65.6 66.0 66.0 66.0

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -3 % -1 % 2 % 1 % 1 % 1 % 0 % 1 % 1 % 1 % 1 % 1 % - - - -

COGS (Excl Depreciation) 0 % -3 % 1 % 2 % 1 % 1 % -1 % -1 % 1 % 3 % 0 % 0 % - - - -

EBITDA -5 % 4 % -10 % -2 % -1 % 7 % 4 % 6 % -1 % -5 % 3 % 4 % - - - -

EBIT 9 % 4 % -13 % -4 % -2 % 9 % 4 % 7 % -1 % -7 % 4 % 5 % - - - -

Recurring PAT -8 % 6 % -12 % -7 % 2 % 8 % 5 % 7 % -3 % -6 % 5 % 6 % - - - -

EPS -8 % 6 % -12 % -7 % 2 % 8 % 5 % 7 % -3 % -6 % 5 % 6 % - - - -

Yearly Growth (%)

Revenue 0 % -2 % 0 % -2 % 2 % 5 % 3 % 3 % 4 % 4 % 4 % 4 % -1 % 3 % 4 % 5 %

EBITDA 1 % 5 % -11 % -13 % -9 % -7 % 7 % 15 % 16 % 3 % 3 % 1 % -5 % 1 % 5 % 5 %

EBIT -1 % 4 % -13 % -6 % -15 % -11 % 7 % 20 % 21 % 3 % 2 % 1 % -4 % -1 % 6 % 5 %

Recurring PAT 1 % 6 % -8 % -20 % -12 % -9 % 8 % 24 % 18 % 3 % 3 % 1 % -6 % 2 % 6 % 5 %

EPS 1 % 6 % -8 % -20 % -12 % -9 % 8 % 24 % 18 % 3 % 3 % 1 % -6 % 2 % 6 % 5 %

Margin (%)

EBITDA 20 % 21 % 18 % 18 % 17 % 18 % 19 % 20 % 20 % 18 % 19 % 19 % 19 % 19 % 19 % 19 %

EBIT 16 % 17 % 14 % 14 % 13 % 14 % 15 % 16 % 16 % 14 % 15 % 15 % 15 % 15 % 15 % 15 %

PBT 20 % 21 % 18 % 16 % 17 % 18 % 19 % 20 % 19 % 18 % 18 % 19 % 19 % 18 % 19 % 19 %

PAT 15 % 16 % 14 % 13 % 13 % 14 % 15 % 16 % 15 % 14 % 15 % 15 % 15 % 14 % 15 % 15 %




Consolidated Financials

P&L (Rs Mn) FY18A FY19E FY20E FY21E

Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E

Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E

Revenue 544,871 561,844 583,631 610,198 Equity Capital 9,048 9,048 9,048 9,048 PBT 102,463 102,153 108,348 113,795

Op. Expenditure 440,943 456,914 473,026 494,098 Reserve 473,888 506,314 540,843 577,006 Depreciation 21,122 22,612 23,198 24,103

EBITDA 103,928 104,930 110,605 116,100 Networth 482,936 515,362 549,891 586,054 Others 0 0 0 0

Depreciation 21,122 22,612 23,198 24,103 Long Term Debt 138,259 121,327 127,994 134,662 Taxes Paid 22,390 20,839 22,211 23,328

EBIT 82,806 82,318 87,407 91,997 Def Tax Liability 16,519 42,451 44,784 47,116 Change in WC -4,205 -3,078 -3,709 -4,704

Interest Expense 5,629 4,881 4,817 5,076 Minority Interest 2,410 2,310 2,189 2,042 Operating C/F 96,990 100,848 105,625 109,866

Other Income 25,286 24,716 25,758 26,874 Account Payables 68,129 69,768 72,171 75,528 Capex -19,217 -6,701 -13,797 -15,352

PBT 102,463 102,153 108,348 113,795 Other Curr Liabi 52,387 64,211 66,701 69,737 Change in Invest -1,771 0 0 0

Tax 22,390 20,839 22,211 23,328 Total Liabilities & Equity 760,640 815,429 863,730 915,139 Others 0 0 0 0

PAT bef. MI & Assoc. 80,073 81,314 86,136 90,467 Net Fixed Assets 82,597 83,611 81,453 81,510 Investing C/F -20,988 -6,701 -13,797 -15,352

Minority Interest 3 -100 -121 -147 Capital WIP 0 0 0 0 Change in Debt -4,153 -16,932 6,667 6,667

Profit from Assoc. 0 0 0 0 Others 171,887 154,962 147,718 138,911 Change in Equity -111,581 19 0 0

Recurring PAT 80,070 81,413 86,257 90,614

Inventory 3,370 3,475 3,610 3,774 Others -10,989 -23,074 -49,396 -52,118

Extraordinaires 0 0 0 0 Account Receivables 100,990 110,830 115,127 120,368 Financing C/F -126,723 -39,987 -42,728 -45,451

Reported PAT 80,070 81,413 86,257 90,614 Other Current Assets 107,777 116,683 120,732 126,277 Net change in cash -50,721 54,160 49,100 49,063

FDEPS (Rs) 17.7 18.0 19.1 20.0 Cash 294,019 345,868 395,090 444,300 RoE (%) 16 % 16 % 16 % 16 %

DPS (Rs) 1.1 9.0 9.5 10.0 Total Assets 760,640 815,429 863,730 915,139

RoIC (%) 13 % 13 % 13 % 13 %

CEPS (Rs) 22.4 23.0 24.2 25.4 Non-cash Working Capital 91,621 97,009 100,597 105,154

Core RoIC (%) 19 % 19 % 21 % 22 %

FCFPS (Rs) 17.8 21.7 21.1 21.8 Cash Conv Cycle 61.4 63.0 62.9 62.9 Div Payout (%) 7 % 60 % 60 % 60 %

BVPS (Rs) 99.2 113.9 121.5 129.5 WC Turnover 5.9 5.8 5.8 5.8 P/E 16.3 16.0 15.1 14.4

EBITDAM (%) 19 % 19 % 19 % 19 % FA Turnover 6.6 6.7 7.2 7.5 P/B 2.9 2.5 2.4 2.2

PATM (%) 15 % 14 % 15 % 15 % Net D/E -0.3 -0.4 -0.5 -0.5 P/FCFF 16.2 13.3 13.6 13.2

Tax Rate (%) 22 % 20 % 21 % 21 % Revenue/Capital Employed 0.8 0.9 0.8 0.8 EV/EBITDA 11.2 10.7 9.8 9.0

Sales Growth (%) -1 % 3 % 4 % 5 %

Capital Employed/Equity 1.3 1.3 1.3 1.3

EV/Sales 2.1 2.0 1.9 1.7

FDEPS Growth (%) -6 % 2 % 6 % 5 %

Dividend Yield (%) 0.4 % 3.2 % 3.4 % 3.6 %

TTM P/E vs. 2 yr forward EPS growth

TTM P/B vs. 2 yr forward RoE

10x

15x

18x

20x

25x

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

-

50

100

150

200

250

300

350

400

450

500

Mar

/09

Mar

/10

Mar

/11

Mar

/12

Mar

/13

Mar

/14

Mar

/15

Mar

/16

Mar

/17

Mar

/18

Mar

/19

EPS Growth

0%

5%

10%

15%

20%

25%

30%

35%

40%

-

100

200

300

400

500

600

Mar/

09

Mar/

10

Mar/

11

Mar/

12

Mar/

13

Mar/

14

Mar/

15

Mar/

16

Mar/

17

Mar/

18

Mar/

19

RoE

1x

2x

3x

4x

5x




Historical Consolidated Financials

P&L (Rs Mn) FY15A FY16A FY17A FY18A

Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A

Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A

Revenue 469,545 512,440 550,402 544,871 Equity Capital 4,937 4,941 4,861 9,048 PBT 112,241 89,571 85,179 102,463

Op. Expenditure 364,936 404,402 441,277 440,943 Reserve 365,983 460,219 515,443 473,888 Depreciation 13,076 14,965 23,105 21,122

EBITDA 104,609 108,038 109,125 103,928 Networth 370,920 465,160 520,304 482,936 Others -15,418 7,264 5,459 0

Depreciation 12,823 14,965 23,105 21,122 Long Term Debt 77,148 125,221 142,412 138,259 Taxes Paid 24,266 26,935 25,476 22,390

EBIT 91,786 93,073 86,020 82,806 Def Tax Liability 4,015 20,697 21,667 16,519 Change in WC -7,229 -5,988 4,511 -4,205

Interest Expense 3,599 5,582 5,183 5,629 Minority Interest 1,646 2,224 2,391 2,410 Operating C/F 78,404 78,877 92,778 96,990

Other Income 23,496 27,364 29,519 25,286 Account Payables 58,486 68,187 65,486 68,129 Capex -11,413 -13,172 -15,274 -19,217

PBT 111,683 114,855 110,356 102,463 Other Curr Liabi 71,553 42,514 41,256 52,387 Change in Invest -15,400 -104,311 -83,684 -1,771

Tax 24,624 25,356 25,213 22,390 Total Liabilities & Equity 583,768 724,003 793,516 760,640 Others 856 -20,673 -17,325 0

PAT bef. MI & Assoc. 87,059 89,499 85,143 80,073 Net Fixed Assets 54,275 81,053 85,822 82,597 Investing C/F -25,957 -33,455 -11,582 -20,988

Minority Interest 531 493 248 3 Capital WIP 0 0 0 0 Change in Debt 21,107 35,251 13,189 -4,153

Profit from Assoc. 0 0 0 0 Others 97,303 140,125 168,796 171,887 Change in Equity 5 4 0 -111,581

Recurring PAT 86,528 86,528 86,528 86,528 Inventory 4,849 5,390 3,915 3,370 Others -30,210 -36,842 -35,941 -10,989

Extraordinaires 0 0 0 0 Account Receivables 91,548 99,614 94,846 100,990 Financing C/F -9,098 -1,587 -22,752 -126,723

Reported PAT 86,528 86,528 86,528 86,528 Other Current Assets 117,686 94,528 95,397 107,777 Net change in cash 43,349 43,835 58,444 -50,721

EPS (Rs) 19.1 19.7 18.8 17.7 Cash 218,107 303,293 344,740 294,019

RoE (%) 24 % 21 % 17 % 16 %

DPS (Rs) 20.0 26.7 4.1 1.1

Total Assets 583,768 724,003 793,516 760,640

RoIC (%) 21 % 17 % 14 % 13 %

CEPS (Rs) 40.2 42.1 44.4 22.4 Non-cash Working Capital 84,044 88,831 87,416 64,420 Core RoIC (%) 30 % 26 % 20 % 19 %

FCFPS (Rs) 22.4 20.1 35.1 17.8 Cash Conv Cycle 65.3 63.3 58.0 43.2 Div Payout (%) 67 % 87 % 14 % 7 %

BVPS (Rs) 75.2 94.2 106.8 99.2 WC Turnover 5.6 5.8 6.3 8.5

P/E 15.1 14.6 15.4 16.3

EBITDAM (%) 22 % 21 % 20 % 19 % FA Turnover 8.7 6.3 6.4 6.6 P/B 3.8 3.1 2.7 2.9

PATM (%) 18 % 17 % 15 % 15 % Net D/E -0.4 -0.4 -0.4 -0.3 P/FCFF 12.9 14.3 8.2 16.2

Tax Rate (%) 22 % 22 % 23 % 22 % Revenue/Capital Employed 1.3 1.3 1.3 1.0 EV/EBITDA 11.2 10.8 10.5 11.2

Sales growth (%) 8 % 9 % 7 % -1 %

Capital Employed/Equity 1.3 1.2 1.2 1.3

EV/Sales 2.5 2.3 2.1 2.1

FDEPS growth (%) 11 % 3 % -5 % -6 %

Dividend Yield (%) 6.9 % 9.3 % 1.4 % 0.4 %




Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 VishadTurakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 SubhamSinha [email protected] 91-22-43320631

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Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Manoj Kejriwal [email protected] 91-22-43320663

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Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

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Corporate Office:

3rd floor, House No. 9,

Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,

S.G. Highway Ahmedabad-380054

Gujarat

Tel. No: +91 (0)79 - 6190 9550

Fax No: +91 (0)79 – 6190 9560





























© 2018 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not

be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited

Analyst Certification

I, AbhishekShindadkar, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I

also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures

Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the

Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock

Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers

Regulations, 1993 (Reg. No.INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP-324-2017). There are no disciplinary actions taken by any regulatory

authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to

merchant banking services, private equity, mergers & acquisitions and structured finance.

As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for

investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have

received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their

directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in

their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or

Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor

Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or

brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.

The Research Analyst engaged in preparation of this Report:-

(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c)

has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or

services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject

company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject

company.

This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein

may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable

restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this

document without subjecting ESPL and affiliates to any registration or licensing requirement within such jurisdiction.

This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on

this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to

its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information

contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information

current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the

securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives,

financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or

anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its

research report. Thus, investors should be aware that the firm may have conflict of interest.




A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the

“three years” period in the price chart).

Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst’ or Relatives’ financial interest No

Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No

Research Analyst’ or Relatives’ material conflict of interest No

Disclaimer for U.S. Persons

ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a

registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under applicable state laws in the United States.

Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended

for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition on

soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective contents

do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons"

are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under

certain rules.


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