Accumulate Wipro; target of Rs 471: KR Choksey

KR Choksey's research report on Wipro

Wipro Ltd (WPRO) Q1FY23 performance was lower than our estimate. Dollar Revenue was marginally up 0.5% QoQ in CC term to USD 2,736mn (KRChoksey est. USD 2,769Mn). Rupee revenue grew by 3.2%QoQ to INR 215,286Mn (KRChoksey est. INR 213,752Mn). Reported operating margin was down to 14.3% QoQ as the several initiatives were taken by the company to turn around the operations. Company reported a net profit of INR 25,636Mn with margin of 11.9%. Operational efficiencies (several levers such as utilization, fresher intake, pricing, sub-contracting, attrition & employee pyramid) in the next quarter will offset the impact of wage hikes but remains a higher chance of margin dilution due to Rizing integration. Increase in employee costs (including Products & ISRE business), rising procurement cost of hardware/software, increase in doubtful debt provisioning, higher travel/marketing expenses and increase in facility expenses are likely to keep margins under check in the near term. Our target price of INR 471 is based on 18x Mar-24E EPS with EPS CAGR of ~10.2% over FY22-24E.

Outlook

Hence we are assigning a P/E multiple of 18.5x to the FY24 estimated EPS of INR ~26.2 to arrive at a target price of INR 471 (Earlier Target price INR 602) per share, an upside of 14.1% over the CMP. Accordingly, we reduce our view to “ACCUMULATE” rating for the stock.

More Info

At 17:30 Wipro was quoting at Rs 414.10, up Rs 1.90, or 0.46 percent.

It has touched an intraday high of Rs 417.50 and an intraday low of Rs 402.40.

It was trading with volumes of 1,439,574 shares, compared to its thirty day average of 609,762 shares, an increase of 136.09 percent.

In the previous trading session, the share closed up 1.63 percent or Rs 6.60 at Rs 412.20.

The share touched its 52-week high Rs 739.80 and 52-week low Rs 391.00 on 14 October, 2021 and 15 July, 2022, respectively.

Currently, it is trading 44.03 percent below its 52-week high and 5.91 percent above its 52-week low.

Market capitalisation stands at Rs 227,025.12 crore.

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Wipro - 210722 - kr