Buy Wipro; target of Rs 465: FIFL

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Buy Wipro; target of Rs 465: FIFL

Fortune Interfinance (FIFL) is bullish on Wipro and has recommended buy rating on the stock with a target of Rs 465 in its January 24, 2012 research report.

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Fortune Interfinance (FIFL) is bullish on Wipro and has recommended buy rating on the stock with a target of Rs 465 in its January 24, 2012 research report.

"An inline performance: Wipro's op performance was in line with expectations. Rev at US$ 1,505 mn (+2.2%)QoQ, +4.5% QoQ in c.c terms) met estimates, margins improved only by ~80 bps sequentially to 20.8 % despite a 9% QoQ currency depreciation and a 2.7% constant currency pricing benefit impacted adversely by ~100bps QoQ increase in SG&A expenses during the qtr. Profits at Rs 14.6 bn (+12% QoQ) beat est. helped by higher than expected other income. We note that volume growth was tepid at 1.8% QoQ (lower than peers Infy, TCS) with rev growth aided by a 2.7% QoQ increase in pricing (note this comes on the back of decline in the past 2 qtrs). However we appreciate the improvement in op metrics especially on client mining with growth being led by top clients (top 1/5 clients grew by 8%/4% sequentially at Wipro unlike peers Infy and TCS wherein top clients performance has been relatively subdued). HC addition was strong for the 2nd qtr in a row with co adding ~5k people on a net basis following on the strong Sep'11 qtr addition with attrition falling to the lowest levels in 8 qtrs. Rev from US were up by ~3.8% QoQ while amongst the momentum verticals, Fin Svcs (+3% QoQ), Healthcare (+4.3% QoQ) and Retail (+3.6% QoQ) led growth."

"Wipro has stepped up investments in employee hiring over the past two quarters and lowered utilization rates, indicating improved demand visibility for company. Its 4Q rev guidance of 1-3% qoq growth is higher than that of Infy (0%qoq). Moreover, it has lesser exposure to the discretionary service line of enterprise application services consulting. We expect steady EBIT margins for Wipro over FY12-14 (vs. a decline for peers) as the company optimizes operations."

"Wipro has stepped up investments in employee hiring over the past two quarters and lowered utilization rates, indicating improved demand visibility for company. Its 4Q rev guidance of 1-3% qoq growth is higher than that of Infy (0%qoq). Moreover, it has lesser exposure to the discretionary service line of enterprise application services consulting. We expect steady EBIT margins for Wipro over FY12-14 (vs. a decline for peers) as the company optimizes operations," says Fortune Interfinance research report.          

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To read the full report click on the attachment