Wipro revenue increased on 9.1% while EBITDA Margin decreased slightly on 1.2 pp from 22.3% to 21.1%
20-04-2016 • About Wipro (
$WIPRO) • By InTwits
Wipro reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:
- Wipro is a growth stock: FY2016 revenue growth was 9.1%, 5 year revenue CAGR was 10.5% at FY2016 ROIC 17.2%
- Wipro has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's in pair with industry average of 3.4%
- CAPEX is quite volatile: ₹5,393m in FY2016, ₹17,250m in FY2015, ₹6,347m in FY2014, ₹3,884m in FY2013, ₹6,397m in FY2012
- The company has highly profitable business model: ROIC is 17.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 9.1%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.9 pp from 21.1% to 24.0% in FY2016. During FY2012-FY2016 EBITDA Margin topped in FY2014 at 22.4% and was declining since that time.
Gross Margin decreased slightly on 1.2 pp from 31.6% to 30.4% in FY2016. During the last 5 years Gross Margin topped in FY2014 at 32.0% and was declining since that time. SG&A as a % of Revenue showed almost no change in FY2016. During the last 5 years SG&A as a % of Revenue bottomed in FY2015 at 12.0%.
Net Income margin decreased slightly on 1.1 pp from 18.4% to 17.4% in FY2016. During FY2012-FY2016 Net Income margin topped in FY2015 at 18.4%.
Investments (CAPEX, working capital and M&A)
Wipro's CAPEX/Revenue was 2.7% in FY2016. The company showed almost no change in CAPEX/Revenue from FY2013 to FY2016. It's average level of CAPEX/Revenue for the last three years was 2.5%. During FY2012-FY2016 CAPEX as a % of Revenue bottomed in FY2014 at 2.1% and was growing since that time.
Return on investment
The company operates at high and attractive ROE (20.3%) while ROIC is a bit lower (17.2%). ROIC decreased on 3.6 pp from 20.8% to 17.2% in FY2016. ROE decreased on 2.7 pp from 23.0% to 20.3% in FY2016. During FY2012-FY2016 ROIC topped in FY2014 at 23.2% and was declining since that time. During the last 5 years ROE topped in FY2014 at 24.9% and was declining since that time.
Leverage (Debt)
Debt level is 0.2x Net Debt / EBITDA and 1.2x Debt / EBITDA. Net Debt / EBITDA jumped on 1.0x from -0.8x to 0.2x in FY2016. Debt jumped on 58.7% while cash dropped on 37.7%. During FY2012-FY2016 Net Debt/EBITDA bottomed in FY2015 at -0.8x.
Wipro has short term refinancing risk: cash is only 91.8% of short term debt.
Valuation and dividends
Wipro's trades at EV/EBITDA 14.0x and P/E 16.7x while industy averages are 17.8x and 21.9x. The company's EV/(EBITDA-CAPEX) is 16.0x with the industry average at 22.8x.
Management team
Wipro's CEO Abid Ali Z Neemuchwala has spent 4 years with the company. The company's CFO is Jatin Pravinchandra Dalal. Jatin Pravinchandra Dalal has 5 years tenure at the company.
Financial and operational results
Wipro ($WIPRO) key annual financial indicators| mln. INR | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 371,971 | 374,256 | 434,269 | 469,545 | 512,440 | 9.1% |
| Gross Profit | 108,798 | 113,591 | 138,781 | 148,261 | 155,716 | 5.0% |
| SG&A | 48,063 | 46,245 | 52,786 | 56,475 | 62,562 | 10.8% |
| EBITDA | 70,864 | 78,181 | 97,101 | 104,609 | 108,121 | 3.4% |
| Net Income | 55,730 | 66,359 | 77,967 | 86,528 | 88,922 | 2.8% |
Balance Sheet
|
|---|
| Cash | 77,666 | 84,838 | 114,201 | 158,940 | 99,049 | -37.7% |
| Short Term Debt | 36,448 | 62,962 | 40,683 | 66,206 | 107,860 | 62.9% |
| Long Term Debt | 22,510 | 854 | 10,909 | 12,707 | 17,361 | 36.6% |
Cash flow
|
|---|
| Capex | 12,977 | 10,616 | 8,913 | 12,661 | 13,951 | 10.2% |
Ratios
|
|---|
| Revenue growth | 19.8% | 0.6% | 16.0% | 8.1% | 9.1% | |
| EBITDA growth | 8.3% | 10.3% | 24.2% | 7.7% | 3.4% | |
|
|---|
| Gross Margin | 29.2% | 30.4% | 32.0% | 31.6% | 30.4% | -1.2% |
| EBITDA Margin | 19.1% | 20.9% | 22.4% | 22.3% | 21.1% | -1.2% |
| SG&A, % of revenue | 12.9% | 12.4% | 12.2% | 12.0% | 12.2% | 0.2% |
| Net Income Margin | 15.0% | 17.7% | 18.0% | 18.4% | 17.4% | -1.1% |
| CAPEX, % of revenue | 3.5% | 2.8% | 2.1% | 2.7% | 2.7% | 0.0% |
|
|---|
| ROIC | 19.1% | 19.6% | 23.2% | 20.8% | 17.2% | -3.6% |
| ROE | 21.2% | 23.3% | 24.9% | 23.0% | 20.3% | -2.7% |
| Net Debt/EBITDA | -0.3x | -0.3x | -0.6x | -0.8x | 0.2x | 1.0x |
Peers in IT Consulting & Software
Below we provide Wipro benchmarking against other companies in IT Consulting & Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Ramco Systems ($RAMCOSYS) | 9.3% | 7.3% | 9.9% | 37.0% | - |
| Cyient ($CYIENT) | 30.7% | 20.6% | 17.8% | 24.0% | - |
| Empower India ($EMPOWER) | -3.7% | -13.2% | -32.6% | 23.9% | - |
| Hexaware Technologies ($HEXAWARE) | 34.3% | 17.3% | 13.0% | 21.0% | - |
| Tech Mahindra ($TECHM) | 6.8% | 25.2% | 174.0% | 20.1% | - |
| |
|---|
| Median (22 companies) | 19.5% | 20.6% | 13.5% | 8.2% | 15.9% |
|---|
| Wipro ($WIPRO) | - | 0.6% | 16.0% | 8.1% | 9.1% |
Top companies by Gross margin, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Tata Consultancy Services ($TCS) | - | - | 47.4% | 42.4% | 43.9% |
| Infosys ($INFY) | 41.3% | 98.1% | 35.9% | 38.3% | 37.4% |
| Mindtree ($MINDTREE) | 31.5% | 36.2% | - | 34.8% | 32.4% |
| |
|---|
| Median (3 companies) | 33.8% | 67.1% | 41.6% | 38.3% | 37.4% |
|---|
| Wipro ($WIPRO) | 29.2% | 30.4% | 32.0% | 31.6% | 30.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Oracle Financial Services Software ($OFSS) | 35.3% | 35.2% | 37.4% | 39.7% | - |
| Infosys ($INFY) | 31.6% | 27.9% | 26.3% | 27.1% | 27.1% |
| Tata Consultancy Services ($TCS) | 29.5% | 28.6% | 30.7% | 26.1% | 28.2% |
| Mindtree ($MINDTREE) | 15.1% | 19.8% | 20.6% | 20.3% | 17.7% |
| Sqs India Bfsi ($SQSBFSI) | 10.6% | 18.8% | 20.5% | 19.4% | - |
| |
|---|
| Median (25 companies) | 15.1% | 16.5% | 18.3% | 12.3% | 17.7% |
|---|
| Wipro ($WIPRO) | 19.1% | 20.9% | 22.4% | 22.3% | 21.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Ramco Systems ($RAMCOSYS) | - | 22.1% | 15.3% | 12.4% | - |
| Niit Technologies ($NIITTECH) | 5.9% | 4.6% | 6.1% | 7.9% | - |
| Financial Technologies (India) ($FINANTECH) | 8.9% | 11.4% | - | 6.5% | 5.4% |
| Mindtree ($MINDTREE) | 2.5% | 4.5% | 5.0% | 5.6% | 3.4% |
| Tech Mahindra ($TECHM) | 5.4% | 2.6% | 5.0% | 5.0% | - |
| |
|---|
| Median (20 companies) | 3.9% | 3.5% | 3.5% | 3.1% | 3.9% |
|---|
| Wipro ($WIPRO) | 3.5% | 2.8% | 2.1% | 2.7% | 2.7% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Tata Consultancy Services ($TCS) | 48.6% | 48.4% | 50.2% | 40.5% | 44.4% |
| Hexaware Technologies ($HEXAWARE) | 33.5% | 39.2% | 34.7% | 35.7% | - |
| Mindtree ($MINDTREE) | 24.9% | 34.6% | 36.2% | 32.0% | 28.9% |
| Sqs India Bfsi ($SQSBFSI) | 12.1% | 27.0% | 29.4% | 30.6% | - |
| Tech Mahindra ($TECHM) | 15.4% | 20.1% | 43.0% | 29.7% | - |
| |
|---|
| Median (30 companies) | 19.6% | 21.4% | 22.9% | 20.6% | 27.1% |
|---|
| Wipro ($WIPRO) | 19.1% | 19.6% | 23.2% | 20.8% | 17.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| 3I Infotech ($3IINFOTECH) | 8.5x | 20.3x | 27.7x | 14.7x | - |
| Ramco Systems ($RAMCOSYS) | 8.8x | - | 27.6x | 4.2x | - |
| Onward Technologies ($ONWARDTEC) | 2.4x | 2.2x | 4.1x | 1.9x | - |
| Kpit Technologies ($KPIT) | 0.3x | 0.5x | 0.7x | 0.4x | - |
| Mphasis ($MPHASIS) | -0.1x | 0.2x | - | 0.2x | - |
| |
|---|
| Median (23 companies) | -0.0x | -0.2x | -0.2x | -0.2x | -0.2x |
|---|
| Wipro ($WIPRO) | -0.3x | -0.3x | -0.6x | -0.8x | 0.2x |
