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Jul 24, 2012, 01.32 PM IST
Wipro today a beating today due to a weak guidance for the July-September quarter, despite posting numbers that came in line with expectations.
Weak guidance for the July-September quarter hit IT services company Wipro today, despite posting numbers that came in line with expectations. In an interview to CNBC-TV18, Ankita Somani of Angel Broking says that they will cut FY13 estimates for Wipro because of their weal guidance.
“Guidance was definitely of 0.3-2.3% quarter on quarter growth for the Q2 was disappointing. I was expecting at about 1-3% quarter on quarter growth for Wipro,” she said.
However, she is quick to point out that the stock is currently trading at cheap valuations. “Wipro is trading at about Rs 12 crore FY14 expected EPS. Though the target price is under review right now, this stock has been beaten down very much,” she explained.
She goes on to say that NASSCOM’s 11-14% growth for the industry may be an aggressive target right now.
Below is an edited transcript of her interview with Latha Venkatesh and Ekta Batra.
Q: Give us your one key negative as well as one key positive which you found in the Wipro numbers this time around?
A: The volume growth was one key negative; volume growth was just 0.8% quarter-on-quarter (QoQ) as opposed to Infosys and Tata Consultancy Services (TCS). Infosys reported 2.7% and TCS was more than 5%. So that was one key negative from Wipro results.
A positive thing is that Wipro’s client matrices are improving since quite sometime. They have been scaling up their revenues from their top 5-10 clients so the client mining capabilities of Wipro have been improving QoQ.
Q: The other positive was that in pricing terms they have done a tad better. How does that add up in terms of its comparison with the other IT majors, has Wipro stock been beaten enough now to make it attractive at all?
A: Yes, definitely we have a buy rating on HCL Technologies as well as on Wipro. Wipro as such is trading at a very inexpensive valuation at about Rs 12 crore FY14 expected EPS. Though the target price is under review right now, this stock has been beaten down very much.
Q: How are you looking at the tier two companies? Are there any that you will look at with interest, especially after Geometric’s performance?
A: In the midcaps we like Hexaware as well as MindTree. Hexaware has been performing very well since last one year and it is in fact growing higher than many largecaps. So from the midcaps it is Hexaware and MindTree.
Q: What did you make with regards to Wipro’s guidance going forward?
A: Guidance was definitely of 0.3-2.3% quarter on quarter growth for the Q2 was disappointing. I was expecting at about 1-3% quarter on quarter growth for Wipro. It’s tepid, but still decent.
Q: Would you stick by your current FY13 estimates based on what they have guided?
A: I will slightly downgrade my estimates for FY13 because the guidance for first quarter was very disappointing.
Q: For the sector as a whole you, do you think that NASSCOM’s call of double digit growth now looks definitely said to be reversed?
A: Yes, definitely. 11-14% holds good in constant currency terms for dollar revenue growth, but in terms of reported currency, the cross currency has not been very much favourable for us. So I see 11-14% still slightly aggressive at least on the upper end.
Q: What is your expectation from HCL Technologies?
A: I am expecting this company to grow by about 3% in dollar revenues reported currency while volume growth is expected to be more than 3.5%. Margins are expected to grow by about 200 bps because their wage hike cycle starts from July. I expect HCL Technologies to perform much better than what Infosys and Wipro has given us.
Q: What are your price targets now on Infosys and TCS?
A: For Infosys I am giving about Rs 2,450 as my target. TCS I think is more or less trading at its fair valuation since quite some time, so it is difficult to see absolute upsides from current levels.
Action in Wipro
May 25 2013, 16:36
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May 25 2013, 16:36
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