Buy Wipro; target of Rs 410: PLilladher

Prabhudas Lilladher is bullish on Wipro and has recommended buy rating on the stock with a target of Rs 410 in its April 19, 2013 research report.
 
“Wipro’s Q4FY13 results were below PLe/Consensus expectation. Moreover, seasonality and uncertain external environment prompted for a weaker-thanexpected guidance for Q1FY14. The company has started reporting IT Services business seperately. The company expands its client mining horizon. We reiterate “BUY”, with a revised TP (due to adjustment for the split) of Rs410 (from Rs480).”
 
“Wipro reported another quarter of weak revenue growth of 0.5 percent QoQ (TCS: 3.2 percent, INFO: 1.4 percent, HCLT: 3.2 percent), led by volume growth of 2.5 percent QoQ (Onsite: 2.4 percent, Offshore: 2.5 percent). However, productivity declined by 2.8 percent QoQ and is weaker by ~2pp compared to peers. Moreover, the company guided for -0.6 percent to 1.6 percent QoQ growth which was attributed to seasonality and non-closure of deals in Q4FY13. The management was confident of a positive growth again in Q2FY14. Wipro derives ~10 percent of revenue from IMS (managing assets); however, lags peers in terms of exploiting growth opportunities in the same. The company has been making proactive investments in sales effort and also working closely with solution architect for the rebid deals’ opportunity. The management has identified those plausible opportunities over the next 18 months. We expect IMS growth to get stronge.”
 
“The company has guided for -0.6 percent to +1.6 percent QoQ growth. The weak guidance is largely attributed to seasonality in India and ME business. Moreover, there are few large deals’ decisions involving that got pushed to Q1FY14. The company expects to regain the growth momentum in Q2FY14. Q2 and Q3 are seasonally the strongest quarter for the company. Management’s cautious tone for Q1FY14 was largely attributed to the uncertain environment and seasonality. We expect stable deal funnel, with improved win rate to drive growth in FY14. We reiterate “BUY” rating, with a revised target price of Rs410, 15x FY14E earnings estimate (20 percent discount to TCS),” says Prabhudas Lilladher research report.

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