Accumulate Wipro; target of Rs 465: Dolat Capital

Dolat Capital is bullish on Wipro and has recommended accumulate rating on the stock with a target of Rs 465 in its June 12, 2012 research report.

“Wipro continues to remain cautious on the environment. It believes that the deals are plenty but closures are getting elongated. The Deal wins are becoming a function of pre-emptive consulting led solutions for client business. It is confident of gaining from improved scenario as it continues to invest in line with its three pronged strategy build around Analytics, Innovation and consumerization of technology. The client survey by Wipro suggest flat to negative budget spends in the BFSI segment. Investment banking sub-vertical is expected to witness 5-15% cut in the budgeted spend and is the largest area of concern. Regulatory demands from various initiatives are getting back ended owing to slower decision making.”

“Management indicated shift in the spending patterns by the BFSI clients. The spend mix has changed from 75:25:5 to 40:35:25 for Run the bank: Change the bank: Regulatory Compliance. Thus the decision making is shifting from CIOs to business buyers and it is planning its efforts taking care of the change. It is trying to create a differentiated model by building domain led solutions and designing sales strategy specific to hunt/mine large accounts. It is also working on building process standardization at the back; boosting non linearity through outcome based managed services. The Company has laid down a variable compensation structure for the key personnel based on factors like customer satisfaction, employee satisfaction – attrition and gross profitability. It has witnessed a 500bps improved on client satisfaction over previous year in its annual client survey.”

“Wipro has stated a very articulated restructure/reorg plan and said that it has achieved over 50% of its planned strategy. However; neither its financial performance nor any of the operating metrics indicates a clear trend of improvement. We believe that the new laid strategy is quite focused & elaborate and would ensure its performance improvement; but it is too early to conclude that it would lead to outperformance over peers. At CMP of ` 394 the stock is discounting 13x of its FY14E earnings which we believe is optimum considering its mediocre performance and uncertainty in the environment. Thus we maintain our underperformer stance on the stock and retain TCS, Infosys as our preferred pick in the segment,” says Dolat Capital research report.       

Non-Institutions holding more than 90% in Indian cos

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