Accumulate Wipro; target of Rs 580 Prabhudas Lilladher

Prabhudas Lilladher's research report on Wipro

Wipro's Q2 results were notably stronger than expectations, with both revenue and margins exceeding expectations. It reported IT Services revenue of US$ 2.6 bn, up 0.6% QoQ CC compared to our & cons. est. of flattish quarter. Capco continues its positive momentum but weakness in few segments & client specific issues restricts broad based recovery. Margin performance was impressive during quarter despite 1-month impact of wage hike. Deal wins were robust with TCV of US$ 3.6 bn & large deal wins of US$ 1.5 bn. However, after an impressive Q2 the outlook still remains soft as Q3 will be marked by furloughs due to which company is guiding for revenue guidance of -2 to 0% QoQ CC growth in Q3. As anticipated the growth momentum within Capco continued in 2Q with 3.2% QoQ CC growth, which is a third consecutive quarter of delivering growth above 3% QoQ.

Outlook

We estimate revenues/earnings CAGR of 4.1%/8.8% over FY24-FY27E. The stock is currently trading at 20x FY27E. We are assigning P/E of 22x to FY27E with a target price of Rs580. We maintain “ACCUMUALTE” rating.

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