Accumulate Wipro; target of Rs 470: Dolat Capital

Dolat Capital is bullish on Wipro and has recommended accumulate rating on the stock with a target of Rs 470 in its April 25, 2012research report.

“Wipro results disappoints with sustained revenue growth underperformance, weaker profit performance (FY12 PAT up mere 5% YoY) and soft guidance for Q1. We believe the scaling up in large accounts has not helped in overall growth owing to weak net new client addition (added just 40 new clients in FY12). We continue to maintain our underperformer stance on Wipro versus other Tier 1 peers. Wipro declared a disappointing set of numbers for Q4FY12 with a degrowth in Revenue/EBIT by 0.7%/1.7% QoQ. The deceleration was on account of flat volume growth and weaker realizations on Rs appreciation.”

“The company indicated no major deceleration in deal TCV versus Q3 and said the slippage in Top account (down 8% QoQ) as one off event. It is witnessing deal wins across BFSI, Healthcare and Manufacturing verticals. It has guided 1% growth (Top end) for Q1 and believes the existing pipeline would ensure revenue growth ahead of industry/Nasscom estimate for FY13. We believe even if it achieves top end revenue for Q1 it has to clock a 6.5% CQGR for rest of the quarters to achieve 14%+ growth; which seems daunting considering the underperformance in FY12. EBIT Margin slipped further by 10bps to 17.3% over Q3 (down by 140 bps in FY12). The company suggested margin maintenance for FY13 but we believe it would see some slippage on profitability as it would be investing in its new sales structure (hunting and farming).”

“We have revised down our EPS estimates by 3%/5% for FY13/FY14E with an Accumulate rating on the stock and Target price of Rs 470, valued at 15x of its FY14E earnings,” says Dolat Capital research report.    

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