ICICI Securitie's research report on Wipro
Wipro reported Q4FY24 in-line (ISEC) numbers with IT services segment revenue declining 0.3% QoQ CC, slightly below consensus estimate of 0.2% decline. IT services EBIT margin at 16.4%, up 40bps QoQ, is better than 10bps QoQ expansion estimate of the street. Segmental margin improved 50bps/10bps QoQ for Americas-2/APMEA margin improvement was supported by better utilisation (up 290bps QoQ) and offshoring (60bps QoQ).
Outlook
Wipro has reported in-line earnings in Q4FY24, with better execution at margin front. Bookings were strong at USD 3.6bn. IT services EBIT margin was impressive, up 40bps QoQ, despite headwinds from wage hikes and revenue decline. Highlights from Q4 include: 1) Recovery in Capco and 2) new CEO’s strategy of doubling down on execution. We are sceptical on Capco growth, which appears more like positive seasonality and a result of low base effect. We presume the CEO’s strategic pivot towards better execution and large deal focus as a long-term play and see limited positive triggers in short-medium term as Wipro’s portfolio carries a high discretionary component (reflected in muted FY25 revenue guidance of -1.5% to 0.5%). We value Wipro at 16x (unchanged), on FY26E EPS of INR 26 (FY25-26E EPS kept largely unchanged) to arrive at our TP of INR 410 (vs INR 397 earlier). We revise the rating to REDUCE (from SELL earlier) as the stock has reduced >7% over last month and we see limited downside from hereon.
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