Nuvama Institutional Equities has upgraded Wipro to 'Buy' from 'Hold,' raising the target price to Rs 700 from Rs 520, citing the company's favourable portfolio mix, new leadership under CEO Srini Pallia, and attractive valuations that offer a compelling risk-reward profile. The brokerage's target price implies an upside potential of 20 percent for the IT player's shares from their previous close.
At 11:10 AM, Wipro's shares traded 1.6 percent lower at Rs 573. The stock has gained 20 percent year-to-date, outperforming the Nifty 50, which rose 11 percent during the same period. Wipro has also delivered consistent monthly gains since June 2024.
Wipro's high exposure to discretionary spending, which makes up 60–65 percent of its revenue, positioned it as a laggard when these spends were cut or put on hold over the last few quarters. However, Nuvama believes this could now work to its advantage. "Following the interest rate cut by the Fed in Sep-24 and improving macro dynamics in US, we expect discretionary spends to revive—in turn benefitting Wipro," the brokerage said.
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Wipro's consulting arm, Capco, has shown growth for the past two quarters, with positive commentary from peers like Accenture validating this recovery. Additionally, Wipro's presence in BFSI, which accounts for 34 percent of its revenue, is expected to benefit from an uptick in tech spending by financial institutions. "Commentary of peers such s Accenture, TCS and Infosys, not to mention those of large US banks (JP Morgan, Citi) on incremental tech spends, allude to a recovery in BFSI—which should again benefit Wipro more than peers," Nuvama pointed out.
Nuvama said that Wipro's appointment of Srini Pallia as CEO in April 2024 has brought a wave of optimism. Pallia has reinvigorated the workforce to focus on two key goals—maintaining margins above 16 percent and matching industry growth quickly.
Also Read | IT index slides over 1% as US inflation data signals slower rate cuts
Wipro's consolidated net profit for Q2 FY25 rose by nearly 7 percent quarter-on-quarter to Rs 3,209 crore, surpassing Moneycontrol's estimate of Rs 3,011 crore. Revenue from operations increased by 1.5 percent QoQ to Rs 22,302 crore, beating Moneycontrol's forecast of Rs 22,219 crore.
For the December quarter, Wipro expects IT Services revenue to range between $2,607 million and $2,660 million, implying a sequential guidance of (-)2.0 percent to 0.0 percent in constant currency terms. This marks a downward revision from the September quarter's forecast, which allowed for a revenue change of up to 1 percent in either direction.
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