Buy Wipro; target of Rs 490: Motilal Oswal

“Wipro's growth strategy revolves around focusing on select segments- be it verticals, clients, geographies or services; and developing deep expertise in the chosen segments. The company has shortlisted 138 clients, with a potential to grow to USD50m+, as its growth drivers. Within the momentum verticals, Wipro's focus is on sub-verticals in each of BFSI, Healthcare, Retail and Energy & Utilities. For example, in Energy & Utilities, the company clearly sees and targets (1) spends happening in "Digital Oilfields", where through Big Data, analytics are performed on huge amounts of seismic, geological and spatial data, and (2) investments being made in Smart Grids in multiple geographies (US, UK, China, Canada, New Zealand are a few cases in point). Geography-wise, Wipro is looking to drive growth in India/Middle-East, Africa, APJ, France and Germany. Within Services, it aspires to achieve leadership in new areas like Cloud, Mobility and Analytics. Wipro will also seek to grow by gaining market share amidst the churn happening among vendors, which the management sees as an opportunity over the next 24-36 months.”

“Pharma is going through a "patent cliff". The industry lost USD234b in revenue last year, with a number of patents expiring, and is expected to lose more revenue in the next couple of years. The share of revenue from BRIC nations has gone up from 10% few years ago to 18-25% today. Within the vertical, opportunity in collaborative efforts is estimated at USD3b-4b, Data-driven Insights at USD5b-7b and Risk, Safety and Compliance at USD2b-3b. Wipro's list of clients within Healthcare & Life Sciences includes 4 of the top-5 pharma companies, 3 of the top-10 commercial health plans, and 2 of the top-5 providers. The company's growth strategy revolves around focusing on select segments - be it verticals, clients, geographies or services. It has shortlisted 138 clients, with a potential to grow to USD50m+, as its growth drivers. Wipro will also seek to grow by gaining market share amidst the churn happening among vendors. Wipro's organization restructuring in terms of workforce realignment is complete, but alignment of capabilities is still underway.”

“We expect Wipro to grow its revenue at a CAGR of 15.3% and EPS at a CAGR of 16% over FY12-14. The stock trades at 15.5x FY13E earnings. Valuations may be tested in the near term on a high ask rate to meet the mid-point of Nasscom's guidance. However, valuations at 15x FY13E earnings imply a price of ~INR390, which we see as the bottom for the stock. We believe risk-reward is favorable at Wipro on multiple levers to drive efficiency and growth. Maintain Buy, with a price target of INR490,” says Motilal Oswal research report.

Institutional holding more than 40% in Indian cos

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