Sell Wipro; target of Rs 460: ICICI Securities

ICICI Securitie's research report on Wipro

Wipro has reported revenue decline of 1% in cc vs our estimate of 0.5% growth and street’s 0.1%. The weakness was broad based with energy utilities/ manufacturing/health declining the most by -6.3%/-3%/-2.8% QoQ cc. Energy utilities ramp-down was because of some large projects winding down in the vertical. BFSI was flattish at 0.7% QoQ, unlike strong show by peers. Consumer business was the strongest with 1.6% QoQ growth. Geography wise, North America was strong similar to peers with 0.8% growth. Europe weakness continued with 1.9% QoQ USD decline. APMEA was weak (-4.2%).

Outlook

Wipro’s (WPRO) 1% QoQ cc revenue decline stood lower than street / I-Sec’s estimate of flattish growth and was in contrast to the trend of positive growth surprises delivered by peers in Q1FY25-TD. The weakness stemmed from energy utilities, manufacturing and Europe. Management maintained demand environment remains largely unchanged vs Q4FY24 but indicated of green shoots going into Q2FY25. However, we do not see that reflecting in Q2 guidance of -1% to 1%. Some silver linings from Q1 include: 1) Robust Capco growth (3.4% QoQ), 2) rangebound margin guidance for FY25 with an upward bias, 3) improving consumer business in North America. We revise down our FY26-27 EPS by 6%/5% on weak performance and guidance. We note key portfolio problems in the company, with some components dragging down growth. Downgrade Wipro to SELL from Reduce with a revised TP of INR 460 (vs INR 430 earlier).