Experts do not see much downside for Wipro going forward

IT major Wipro in its second quarter reported a 0.9 percent growth in consolidated profit at Rs 2,070.4 crore for the second quarter (July-September) on sequential basis.Consolidated revenue during the quarter increased 1.5 percent to Rs 13,896.8 crore compared with Rs 13,697.6 crore in preceding period.However, it missed its dollar revenue guidance for the third quarter. It expects revenues from it services business to be in the range of USD 1,916-1,955 million for October-December quarter, a growth of 0-2 percent over September quarter.  But the guidance is lower than analysts' expectations of 1-3 percent growth for the quarter.Analysing the numbers, Prakash Diwan of Altamount Capital Management says their dependence on Middle East market has put them down in the second quarter. However, the energy segment could turn out to be the joker in the pack for them because usually that segment does well in the third quarter, so Q3 dollar revenue guidance could be on the conservative side, feels Diwan.Wipro provides intelligent and sustainable solutions for enterprise-wide energy operations and efficiency management and have built analytical models and correlation logics to deliver energy efficient solutions.Energy, natural resources and utilities saw a growth of 1.3 percent in terms of constant currency sequentially. Going forward, in one or two quarters, Diwan is confident that Wipro will catch with its peers like Infosys and TCS. Now, the management has started becoming aggressive on the acquisition side and is utilising cash in a better ways, says Diwan in an interview to CNBC-TV18.“At the value that the stock is available one could see some marginal erosion from 14 times FY17 to may be 12-12.5 time FY17 and if that happens, it has the potential of becoming a turnaround story,” says Diwan.Agreeing with Diwan’s view, Gaurang Shah, Geojit BNP Paribas too thinks if crude oil moves then Wipro would have more orders coming in from energy side and trigger tailwinds positivity. According to him, one should not expect miracles from the IT pack with the kind of environment they have to live in. However, he too is confident of what the new management is doing at Wipro.Sarabjit Kour Nangra, VP Research, Angel Broking says although the numbers in terms dollar revenue have been low they have done exceedingly well in terms of margins on back of productivity gains.The stock is already 14 times trailing, so not much room for downside, says Nangra. There is definite value in the stock but one is waiting for execution to happen. Next year could be a growth year for them if energy domain and acquisitions contribute, she adds.Meanwhile, Moshe Katri, MD, Wedbush Securities says Wipro seems to be stuck in a vicious cycle of lackluster growth and is not sure if the worst is yet over but it is work in progress. Maybe the acquisitions will help them going forward but at this point the dollar revenue guidance is disappointing. For full discussion, watch videowipro_reax1_21octwipro_reax2_21oct