Analysts believe the third quarter FY16 performance of Wipro is in line with expectations and there is unlikely to be any specific reaction on its stock price due to these results.
According to Harendra Kumar, Managing Director at Elara Capital, the stock is aptly priced currently and there is no reason for either re-rating or de-rating the stock.
A similar opinion is echoed by Pankaj Sharma, Head of Equities at Equirus Securities who believes that the stock is unlikely to see any earnings estimate or rating changes purely on the basis of the quarter results.
Karan Taurani, Senior Analyst at Dolat Capital says that although the results were marginally lower than the company’s guided numbers, the 2-4 percent USD revenue growth guidance for Q4 is healthy. Below is the verbatim transcript of Karan Taurani and Pankaj Sharma's interview with Reema Tendulkar, Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Sonia: The only number that we have is the IT services rupee revenue number which is at Rs 12,314 crore. What is your reaction to that? Taurani: It is a tad lower than our estimate. Our estimate was about Rs 12,900 crore odd, so, it is roughly tad below estimates. We need to look at the dollar numbers and the margins to get the overall performance.
Sonia: Margins at 20.16 percent and Rs 2,482 is the EBIT number. How would you react to that? That seems to be largely in line with expectations. Taurani: That is largely in line with expectations. Margins were expected to dip slightly in terms of the IT services which has happened. They had an impact of Chennai, they also had some marginal impact of some base headwinds and utilisation been lower, so that is the reason margins have been slightly lower. It has been in line with peers.Sonia: USD 1,838 million is what they have done in terms of the revenues compared to an expectation of USD 1,842 million, so it could be perhaps slightly lower than expectation but largely inline. Sequential growth of 0.3 percent in their dollar revenues versus an expectation of 0.5 percent sequential growth and the constant currency growth has come in at 1.4 percent. What is your reaction to these numbers?Taurani: They have done below their guidance this quarter. If you see the number, USD 1,838 million is below their guidance range of USD 1,841 million to USD 1,878 million. So, in the press release if you see, a month back, because of the Chennai impact they pointed out that they will be doing at the lower half of the lower end of the guidance. However, they have done below the guidance so that is like a slight negative in terms of dollar revenue. The outlook overseas is good, 2-4 percent kind of guidance going ahead. We were expecting about 1-3 percent kind of a guidance. So, that is better than our expectations because Q3 and Q4 are seen better for Wipro as compared to peers. However, the performance this quarter is slightly on the muted side.Sonia: Looks like a muted set of numbers but what is your own review and how would you react to this guidance of USD 1,875 -1,912 million for the next quarters?Sharma: Overall it is an okay kind of number. I really don’t think that market get should get too worried about the numbers. Of course there is nothing much which is also very positive so it is a kind of performance which is largely inline. Of course in the light of two things which is some of these core businesses which they have in verticals like energy they been facing pressure and in the context of that and also what has happened with the recent issues in Chennai I think it is an okay kind of performance which I would probably give it a 6 out of 10 or 7 out of 10. However, as far as their overall outlook and guidance is concerned I think it is pretty good because I believe that today if you look at what they have done in last couple of quarters if they are able to do the fourth quarter guidance I think market would l be more or less satisfied with their performance.Latha: What is your price target?Sharma: We have Rs 570 price target and we have neutral rating. However, I agree with the other panelist that it is unlikely to be a trigger for any de-rating or re-rating for Wipro purely on the basis of the results. There is nothing in these results which would probably trigger that.
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