Wipro an outperformer; target of Rs 675: Karvy

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Wipro an outperformer; target of Rs 675: Karvy

Broking house, Karvy Stock Broking has maintained an outperformer rating on Wipro with a target of Rs 675.

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Broking house, Karvy Stock Broking has maintained an outperformer rating on Wipro with a target of Rs 675.

Karvy Stock Broking report on Wipro:

"We for Q3FY07 expect Wipro to report IT+ITES revenues of Rs 28.8 bn sequential growth of 5.9%, and the overall revenues are likely to increase by 6.7% on a rolling quarter basis. As the revenues from hardware and other consumer business (which accounts for 16 - 18%) would make a comeback from the Q2 onwards, we expect the overall revenues to grow little faster than the IT services revenues."

"Though better productivity and much improved performance from ITES would enhance the margins, however the wage increase, which will come into force from Q2 (with retrospective effect), would keep the margin expansion muted. We expect the margins to contract by 40bps to 23.4%. Besides increase in revenues of some of its low margin business are also dampening the margin expansion and the appreciation of the rupee would also play a small part."

"On account of margin contraction and factoring treasury loss of Rs350mn the net profit growth for Q3FY07 would be at 4.3%QoQ, as we expect the company to make factor higher tax provisioning, as it has been receiving the notices from the IT department for not strictly adhering to section 10A/ B of the IT Act."

"In terms of client additions we expect the company to add more clients - than the last four quarter averages and the offshore to onsite revenue mix to tilt in favour of offshore. In terms of revenues by vertical and service offerings we don't expect any dramatic swing either; however we do expect revenues from transaction processing to witness decent growth and more importantly the margins of the ITES revenues to expand."

"Since we expect the company to experience strong earnings growth rates for the next two years, we continue to maintain with our outperformer rating on the stock."