Wipro met street expectations in third quarter (October-December) with the IT services revenues growing 2.6 percent sequentially to Rs 10,327 crore. Consolidated profit after tax of the company climbed 4.27 percent sequentially to Rs 2,014.7 crore and revenues grew 3 percent to Rs 11,327.4 crore for the quarter ended December 2013.
In dollar terms, IT services revenue rose 2.9 percent quarter-on-quarter (6.4 percent on yearly basis) to USD 1,678.4 million that was in-line with company's guidance (USD 1660-1690 million) and analysts' forecast (USD 1677 million).
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Credit Suisse maintains outperform on the stock with a revised target of Rs 650 from Rs 600. It says that revenue growth will need to significantly accelerate for major relative outperformance. “Revenue growth is now in the middle of peer range and margin trajectory improve along with tailwinds for the sector will continue to help the stock,” it adds.
Goldman Sachs retains sell with a target of Rs 400 implying 28 percent downside. The brokerage expects Wipro to continue to lag peers due to weak Application Development and Maintenance (ADM) business, high competition in Infrastructure management services and lack of traction in other growth verticals despite multi-year restructuring.
Citi has a buy rating on the stock with a target of Rs 650. It anticipates upgrades on the stock as the street factors in the higher margin levels. “The business is turning around and improving demand should further help – Wipro remains one of our top picks in the sector,” Citi says.
CLSA feels that true test of Wipro’s revenue turnaround will come in the seasonally strong June quarter where it has faltered over the past 3 years, and re-rating will likely have to wait till then.
However, Macquarie retains neutral rating on the stock and thinks any share price gain is capped. “We change our target multiple to 15x (vs 14x earlier) to arrive at our revised target price of Rs 570 (vs Rs 490 earlier),” it says.
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