Wipro delivered a decent third quarter (October-December) on the back of muted expectations. Revenue growth stood at mid-point of its stated guidance, margin was not disappointing and the management stated no overt deterioration or improvement in the operating environment.
While there was weakness in certain verticals, the overall outlook has not worsened, post the Q3 FY20 earnings report.
The subdued performance so far has resulted in significant underperformance of the stock as against the benchmark Nifty as well as the IT index. The stock is not far from its 52-week low.
While the undemanding valuation at 13.7x FY21e earnings protects the downside and hence could be considered as a defensive strategy, we do not see outperformance as long as Wipro lags its peers in growth. We expect mid-single digit earnings growth over the next couple of years.