Buy Wipro; target Rs 395: R K Global
R K Global is bullish on Wipro and has recommended buy rating on the stock with a target price of Rs 395, in its July 25, 2012 research report.
July 26, 2012 / 14:36 IST
R K Global is bullish on Wipro and has recommended buy rating on the stock with a target price of Rs 395, in its July 25, 2012 research report.
Wipro, India's third largest software exporter reported ~8% sequential growth in consolidated revenues to Rs 1,06,196 mn (~6% above our estimates) for the Q1FY’13. IT services revenues grew ~18% YoY to Rs 86,457 mn in rupee terms but de-grew ~1.37% QoQ to USD1,515 mn in dollar terms due to ~0.9% decline in onsite price realization and ~2% decline in offshore part on a QoQ basis.The company lost USD25 bn in revenue terms due to currency fluctuations. IT revenues increased by 0.3% sequentially on a constant currency basis. On a constant currency basis, onsite realizations were up 0.2% but offshore realizations were down 1% on a QoQ basis. The revenues were impacted by Americas (down ~2.2% QoQ) and India & Middle East business (down 9.9% QoQ) while Europe and APAC and other emerging markets grew ~0.3% and ~5.3% QoQ respectively. In terms of services, Technology infrastructure services de-grew ~0.3%, Business Application services ~1.1% and ADM services 6.3%. All major verticals except Manufacturing & Hi-Tech (up ~0.5% QoQ) de-grew. Healthcare, Life sciences and services de-grew 1.2%, Finance solutions 2%, Global Media and telecom 1%, Retail& Transportation 3.9% and Energy & Utilities 0.3%.The company did away with its tradition of providing quarterly guidance citing market uncertainty; all eyes were on Wipro's second quarter outlook. Pegging between slightly negative to flat revenue growth. The guidance also suggests muted, potentially negative volume growth. Wipro's volumes inched up 0.8% in the June quarter, far behind TCS, which reported a volume growth of over 5%. Margin expansion terms as the savior, gives some relief. OPM inched up by 30bps to ~20.2% which led to a ~9% rise in operating profits to Rs 21,426 mn. Net profits were up by 7% to Rs 15,802 mn impacted by increase in interest costs.TP cut over impending business environment, though worth a BUY. In Jan’12, we mentioned that the 3 pillars of growth, viz, volume pricing & utilizations are yet to mature for Wipro. Now, at the end of Q1FY’13, except the pricing piece of it (not mature but somehow cautiously stable), the rest two pillars are yet to show pick up. However, unlike Infosys, there is a solace of revenue visibility. The stock presently trades at a P/E of ~10.2x and P/BVPS of ~2.6x of FY’13E EPS and BVPS. We re-price our earlier TP of Rs 441 to Rs 395 (~16.8%), arrived at a P/E of ~12.0x and P/BVPS of ~3.0x, using FY’13E EPS of Rs 33 and BVPS of Rs 128,” says R K Global research report.Shares held by Mutual Funds/UTI Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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