Wipro shares plunged more than 10 percent on Monday morning after investors slammed India's third largest software services exporter on weak revnue growth in the fourth quarter and muted guidance for April-June.
Wipro shares plunged more than 10 percent on Monday morning after investors slammed India's third largest software services exporter on weak revenue growth in the fourth quarter and muted guidance for April-June.
Bangalore-based Wipro on Friday reported a fourth quarter consolidated net profit of Rs 1,729 crore, up 17 percent from a year ago (1 percent sequentially), slightly better than street expectations of Rs 1,685 crore. However, revenue rose just 13 percent YoY or 0.3 percent QoQ to Rs 9,613 crore.
First quarter guidance also didn't offer much to cheer about. It is expecting revenue of USD 1,575-1,610 million from its IT services business in April-June. This compared with revenue of USD 1,585 million in Jan-March, indicates a 0.6 percent decline at the lower end and just 1.6 percent uptick at the higher end.
Kotak Institutional Equities cut its earnings estimates on Wipro by 5 percent for the next two years and put a "reduce" rating on the stock. It also cut its target by 5 percent to Rs 350.
"More than two years of transformational journey undertaken by the company has barely filtered into growth, profitability and financial performance. Weak external environment and competitive pressures reduce hope for a turnaround," the brokerage said.
Other brokerages also were disappointed with Wipro's performance, but have a more optimistic openion on the future.
"Wipro’s Q4 numbers were disappointing as revenue at USD1,585 million grew a mere 0.5 percent QoQ versus our 2.0 percent estimate. While volume growth was decent at 2.5 percent QoQ, blended realisation dipped 2.6 percent on reported basis. Further, Q1 revenue growth guidance of -0.6 to 1.6 percent is muted due to seasonal weakness led by India and Middle East," said Edelweiss Securities analysts Sandip Agarwal and Omkar Hadkar.
The Edelweiss analysts, however, still maintain a "buy" on the stock with a target price of Rs 442, saying the company's operational metrics, which are currently stretched, will improve as growth picks up.
"...As deal activity picks up, Wipro will benefit from the same, particularly in the IMS space as new deals have significant IMS component and this practice has been doing well for the company (2.8 percent CQGR versus company growth of 0.8 percent over past four quarters)," Agarwal and Hadkar noted.
At 9:30 hrs, Wipro shares were down 10.7 percent at Rs 329.75 on NSE.