Sell Wipro; target of Rs 321: Nirmal Bang

Nirmal Bang is bearish on Wipro and has recommended sell rating on the stock with a target of Rs 321 in its July 24, 2012 research report.

“Wipro’s 2QFY13 US dollar revenue guidance of 0.3-2.3% QoQ growth was poor and, in absolute terms, is the third successive quarter that the IT major has given the exact same dollar revenue guidance, implying no growth momentum whatsoever. In our view, this guidance is likely to lead to the stock continuing to get a short shrift from investors. Owing to a worsening growth outlook for the company and consistent decline in YoY IT services dollar revenue growth over the past five successive quarters, we have cut our PE multiple from 15x to 12.5x FY13E EPS. Thus, despite the fact that the stock has shed 16% since we downgraded it to Sell, we retain our Sell rating with a revised TP of Rs321 (Rs392) as we have cut the PE multiple and also FY13E/FY14E EPS estimates by 1.6%/3.9%, respectively.”

“Wipro’s 2QFY13 US dollar revenue guidance of 0.3-2.3% QoQ growth was poor and, in absolute terms, is the third successive quarter that the IT major has given the exact same dollar revenue guidance, implying no growth momentum whatsoever. In our view, this guidance is likely to lead to the stock continuing to get a short shrift from investors. Owing to a worsening growth outlook for the company and consistent decline in YoY IT services dollar revenue growth over the past five successive quarters, we have cut our PE multiple from 15x to 12.5x FY13E EPS. Thus, despite the fact that the stock has shed 16% since we downgraded it to Sell, we retain our Sell rating with a revised TP of Rs321 (Rs392) as we have cut the PE multiple and also FY13E/FY14E EPS estimates by 1.6%/3.9%, respectively. Wipro’s’ 1QFY13 IT service revenue declined 1.4% QoQ to US$1,514.8mn (our estimate US$1,544mn). Pricing fell 1.7% QoQ and volume growth stood at 0.8% QoQ, both below our estimates (0.7% QoQ fall, 1.3% QoQ growth, respectively). Adjusted for cross-currency movements, constant currency revenue grew 0.3% QoQ to US$1,540mn. From a vertical perspective, telecom equipment manufacturers and investment banking remain under stress. In rupee terms, IT revenue grew 9.5% QoQ to Rs83.1bn (our estimate Rs83.6bn). Total revenue grew 6.8% QoQ to Rs104.8bn, slightly below our and consensus estimates.”

“Wipro’s 2QFY13 guidance was a major disppointment and reflects no growth momentum whatsoever. We retain our Sell rating on Wipro with a revised TP of Rs321 (Rs392) as we have cut the target PE multiple to 12.5x (15x) and also FY13E/FY14E EPS by 1.6%/3.9%, respectively,” says Nirmal Bang research report.

Non-Institutions holding more than 90% in Indian cos

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