Wipro has beaten the Street estimates with a 5 percent rise in net profit for the January-March quarter, but persisting cost-cutting measures, decline in headcount and a sluggish guidance for the next quarter fuelled concern among brokerages that a recovery for the IT major may still be some time away.
The company's net profit rose 5 percent on-quarter to Rs 2,835 crore in January-March, surpassing the market projection of Rs 2,748 crore, while its revenue too exceeded expectations, despite staying largely flattish on-quarter at Rs 22,208.3 crore as against the Street estimate of Rs 22,117 crore.
At 09.27 am, shares of Wipro were trading 1 percent higher at Rs 457.50 on the NSE.
Operational efficiencies helped the company expand its EBIT margins by 40 basis points sequentially to 16.4 percent. Going ahead, the management has kept its revenue guidance unchanged for Q1 FY25 to -1.5 percent to 0.5 percent.
It is this sluggish growth guidance from Wipro that left brokerages like JP Morgan, Nomura, HSBC and UBS in a state of discomfiture. While Nomura believes the Q1 FY25 guidance reflects discretionary weakness, UBS sees it as a sign of revival still being afar.
Nomura is also not so optimistic over the sustenance of Wipro's margin expansion as it believes the improvement its likely to moderate going forward in FY25. The brokerage has a 'reduce' call on Wipro with a price target of Rs 410.
Follow our market blog for live updates
On the other hand, HSBC highlighted the continued market share loss of Wipro as it feels that signs of operational improvement are still not imminent. According to the brokerage, growth acceleration for Wipro also doesn't look imminent as cost-cutting measures continue. Regardless, the brokerage is still positive over the elevation of an internal veteran to lead the company. HSBC also has a 'reduce' call on Wipro with a price target of Rs 385.
Wipro's large deal total contract value (TCV) grew 31 percent QoQ to Rs 120 crore. However, UBS feels this growth is not good enough as the IT major not been able to translate its order book into revenue since the past couple of quarters. UBS has also reduced its earnings estimates for Wipro due to lower-than-expected guidance, lowering estimates by 5 percent for FY25 and 4 percent for FY26. UBS has a 'sell' rating on Wipro with a price target of Rs 430.
Based on the sluggish growth guidance, Nuvama Institutional Equities also expects Wipro to underperform peers, however, it feels its inexpensive valuation and high dividend yield limit the downside potential. Nuvama has a 'hold' call with a price target of Rs 460.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
