Hold Wipro; target of Rs 356: KRChoksey

KRChoksey has recommended hold rating on Wipro with a target of Rs 356 in its November 01, 2012 research report.

“Wipro’s board of directors has announced demerger of Consumer Care & Lighting and Others segment (includes Infrastructure Engineering and Medical Diagnostic Product & Services business) into a separate entity i.e. Wipro Enterprises Ltd. (WEL), which will be an unlisted company. Whereas, Wipro Ltd. (Wipro) will focus exclusively on IT related business i.e. IT Services and IT Products. The de-merger announcement would not result into any change in management structure of Wipro.”

“The company has in totality offered three options to shareholders; however different options are offered to diverse class of shareholders (for details refer Working 1 and Working 2). We believe shareholder will realize value accretion of around 4% to 5% from demerger (for details refer Working 3 and Working 4). Option II to shareholder (compulsory for ADR shareholders) will lead to decline in promoter’s holding by 0.2% to 2.6%; depending on the number of shareholders opt for that option (please note Option II is compulsory for ADR holders). Assuming all shareholders go for second option in that scenario promoter’s holding will come down to 75.8% post demerger.”

“Taking into account that Wipro is witnessing stiff competition from peer sets especially in commoditized space (for instance ADM declined by 6% QoQ in USD terms in Q2 FY13), we believe it will continue to trail the peer sets in terms of revenue growth in coming quarters. However, we believe the same is reflected in recent stock price correction and hence there is limited downside from the current level. Therefore, we maintain our ‘hold’ recommendation on the stock with a price target of Rs. 356 by assigning multiple of 14.5 times (i.e. around 20% discount to TCS’s target P/E multiple of 18) to its FY14E EPS of Rs. 24.5,” says KRChoksey research report.

Bodies Corporate holding more than 50% in Indian cos

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

Read More