Wipro an underperformer: Dolat Capital

Dolat Capital has recommended an underperformer rating on Wipro with a target of Rs 406 in its January 18, 2013 research report.
 
“Wipro, results are better than estimates but the wide guidance band for Q4 revenue growth alongwith volume decline of 1% QoQ does not impose any incremental confidence on strong business recovery. The growth is very segment specific and is largely driven by Healthcare vertical (7% QoQ) and few service offerings (IMS, Analytics, Business Application). We continue to maintain our Underperformer stance on Wipro versus other Tier 1 peers based on concentrated growth engines.”
 
“Wipro has been repeatedly claiming of improvement in efficiency and focused strategy on booming technology areas but has been slowest growing company in our coverage group. In our opinion it is trying to move the traction through hypergrowth in some of its growing areas but the problem is the declining revenues in the less focus areas, resulting in sustained underperformance. It is indicating growth in the CTB opportunities versus RTB, which we believe is not in synch with commentary of peers. The Company has indicated a wide band of 0.5% to 3% QoQ growth for Q4 which does not give any clue of a possible perceived recovery and even if it delivers the upper end of its guidance it would be still among the lowest for the quarter considering the strong outlook peers indicated for CY13. Its employee count has increased by about 5% despite stagnating volumes (up mere 1% YoY basis) resulting in over 400bps decline in utilization. We believe the OPM gains (80bps) have been largely supported by realization/fx gains and thus stand at risk in case of adverse movement.”
 
“We have broadly maintained our Revenue/EPS estimates for FY14E and believes no major upside till it starts delivering the performance inline with its claimed commentary. We maintain our underperformer rating with a Target price to Rs 406, valued at 14x of its FY14E earnings (inline with current 12M Fwd discounting),” says Dolat Capital research report.

Public holding more than 90% in Indian cos

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