Should you buy, sell or hold Wipro stock post in-line Q3 show?

The earnings before interest and taxes was reported to be at Rs 2,909.4 crore, a jump of 12.5 percent quarter-on-quarter from Rs 2,586.3 crore.

The IT services EBIT margin rose to 19.8 percent from 18 percent posted during the previous quarter.

The constant currency revenue growth has been reported at 2.4 percent against 2.8 percent that the company posted during the previous quarter.

The dollar revenue for IT services was posted at USD 2,046.5 million. The growth is comparatively flat as compared to previous quarter’s revenue at USD 2,041 million.

The company also announced a bonus issue. Investors in Wipro will get one bonus share for every three shares held.

Here is a gist of multiple brokerages’ view on its results.

Brokerage: Citi | Rating: Sell | Target: Raised to Rs 325 from Rs 315

The global research firm said that revenues were slightly below expectations, but margins surprised. It said that the BFSI segment has been the key driver of growth & macro suggests caution.

Brokerage: Jefferies | Rating: Maintain Underperform | Target: Raised to Rs 290 from Rs 270

Jefferies said that constant currency growth was in-line with consensus estimate. It raised EPS estimates over FY19-21 by 5-7% to reflect better margins. Despite some improvements, analysts said, the company continues to underperform other top tier IT services companies.

Brokerage: Nomura | Rating: Neutral | Target: Rs 320

Nomura observed that Q3 revenue was marginally below, but margin was materially ahead of expectations. This beat on margins will lead to consensus EPS upgrades.

Brokerage: Morgan Stanley | Rating: Underweight | Target: Rs 300

Morgan Stanley said that the earnings were a strong beat on EBIT & PAT and would warrant raising EPS estimates for FY19-21 by 2-4 percent. It is assuming mid-single-digit revenue growth & stable margin in FY20.

Brokerage: CLSA

The global research firm observed that revenue growth was below expectations, but margins beat expectations sharply. Growth outside of its Alight ramp-up was flat and the soft guidance (0-2%) suggests growth challenges persist. The sharp surprise in its margin was led by a sharp reversal of PDD, automation and fall in subcontractors – some of which should reverse over CY19.

“However, strong margin execution over the last two quarters leads us to upgrade margins by 100bps. A combination of 1% revenue cut and 100bps margin increase results in a 4-6% upgrade to FY19-21 EPS and target,” analysts at the firm wrote in their research note.

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