Accumulate Wipro; target Rs 390: Dolat Capital
Dolat Capital is bullish on Wipro and has recommended accumulate rating on the stock with a target price of Rs 390 in its November 2, 2012 research report.
November 03, 2012 / 15:05 IST
Dolat Capital is bullish on Wipro and has recommended accumulate rating on the stock with a target price of Rs 390 in its November 2, 2012 research report.
“Wipro, the results are better than estimates but the weak guidance for Q3 does not impose any incremental confidence on business recovery. We believe the scaling up in few factions has not helped in overall portfolio growth owing to niche specific growth concentration to limited segments. We continue to maintain our underperformer stance on Wipro versus other Tier 1 peers. We maintain our Sector performer rating with a target price to Rs 390, valued at 13x of its FY14E earnings (inline with current 12M Fwd discounting).The company declared Q2FY13 results marginally ahead of expectation and its guidance with a QoQ growth of 1.7% at USD 1.54bn. EBIT degrew 0.7% QoQ with a OPM downtick of mere 40bps which is commendable considering the 2 month salary hike impact during the quarter. The company has indicated a 1.2% to 3% QoQ growth for Q3 which is better than its performance over last 4 quarter’s but does not impose any further confidence considering the perceived improved business outlook by peers in H2.Wipro has seen on average 15% revenue growth in its Top 10 Clients on LTM basis well ahead of rest of the portfolio growth of just 7%, largely driven by traction in the top 10 accounts of its 55 Mega/Gamma (large) clients. The company is expecting the next leg of clients (Top11 onwards) to flourish over next few quarters owing to certain client specific cases (Telco and Investment Banking) and environmental concerns. The company has not shared much on the financial details on demerger but has indicated the Debt break (IT biz at Rs 2bn) and cash break (in sync with assets deployed). We believe demerger event would not act as any key price determinant in the near term.We continue to maintain our sector underperformer call on Wipro owing to its dismal FY12 performance and slow recovery outlook for FY13. We believe that stock would deliver lower growth compared for peers and does not see any margin improvement potential in near term as it is investing big on sales efforts. We recommend accumulate on the stock with a target price of Rs 390, valued at 13x of its FY14E earnings (inline with current 12M Fwd discounting),” says Dolat Capital research report.Shares held by Financial Institutions/Banks 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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