Prabhudas Lilladher recommended accumulate rating on Wipro with a target price of Rs 350 in its research report dated October 24, 2018.
Prabhudas Lilladher's research report on Wipro
Wipro delivered a strong set of results for 2QFY19 with a beat on USD revenues and IT Services EBIT margins. Revenues came at USD2041mn up 0.7% QoQ and above our estimates (USD2010mn). Constant currency growth for the quarter (Adjusted for Data Center Divestment) stood at 2.8% and above our estimates (vs our estimates of 1.5%). Organic constant currency growth for the quarter stood at 2.1% and rest owing to Alight Deal (one-month consolidation). Wipro has shown marked improvement in organic constant currency growth in 2QFY19 and this is the highest organic constant currency growth delivered by Wipro over the past 12 quarters. Among verticals, BFSI grew up 4.4% QoQ and 16% YoY in constant currency. Wipro has shown strong momentum in BFSI vertical over the past six consecutive quarters which is key positive. We note that baring HCL Tech, the other three Tier 1 IT vendors showed strong performance in BFSI vertical in 2QFY19. Consumer Business unit grew by 4.2% QoQ and 7.7% YoY in constant currency and also remained strong. Wipro continued to show steady traction in top accounts. Revenues from top 10 accounts grew 3.6% QoQ in constant currency tin 2QFY19. Digital grew 13.4% QoQ and is now accounts 31.4% of our revenues.
This is improving earnings and ROE trajectory as well and aiding re-rating for the stock. Upgrade Wipro to Accumulate (vs Hold earlier) owing to turnaround in performance and strong capital allocation. TP retained at Rs350/sh (15x Sep 20E EPS).
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