Accumulate Wipro; target Rs 530: Emkay
Brokerage house Emkay Global Financial Services is bullish on Wipro and has recommended accumulate rating on the stock with a target price of Rs 530 in its August 29, 2013 research report.
September 02, 2013 / 13:25 IST
Emkay's research report on Wipro
- Wipro remains focused on driving an improvement in revenue growth trajectory and aims to catch up with peers on sequential revenue growth by Q4FY14
- Deal pipeline remains robust. Strong traction within top 10 clients aided by increased S&M investments expected to continue
- Growth to become broad based ahead as traction in financial services and Healthcare improves. Upside risks to Wipro's margins ahead as growth leverage kicks in
- Upgrade FY14/15E EPS higher by 6/10 percent on revised currency assumptions (Rs 61/63 for FY14/15). Retain ACCUM, and raise TP to Rs 530 as we expect upsides to street's modest expectations.
Our discussions with Wipro management indicate the increased urgency and focus to close growth lag with peers with company aiming to achieve a ‘similar to peers sequential USD rev growth' by Q4FY14. While Wipro's turnaround plans have taken longer than what the street anticipated earlier (a difficult FY13 also delayed the improvement in our view), we see the strategic steps taken over CY11-13, after TK Kurien took over as the CEO, bearing results through the past few quarters. The company has addressed the long standing concern on top 10 accounts mining (top 5/10 clients grew by 18 percent/16 percent for Wipro in FY13 as compared to ~5 percent growth for peers Infosys and TCS). Further Wipro has done well with new deal wins recently (based on top 20 vendors in terms of deal wins based on the ACV of deals won in Q1CY13) all of which should bode well for improvement in revenue growth trajectory ahead.Wipro stepped under the Sales and marketing investments through the past 8 quarters as (1) it realigned the sales organization to the 6 business verticals and (2) hiring senior talent from competition (albeit also saw some churn in it's existing team as well) which has helped drive greater traction in top clients as well as helped increase the no of USD 100 mn+ clients to 10 as of June'13 qtr end V/s just 4 USD 100 mn+ clients back in June'11 qtr. We believe that with Wipro's sales and marketing investments could stabilize at current levels with upside risks to Wipro's margins ahead as company gains from broad based growth pick up across several verticals.While we retain our USD rev estimates broadly, our FY14/15E EPS are raised by 6/10 percent to Rs 29.7/35.1 respectively on revised currency assumptions (factor in USD/INR at Rs 61/63 for FY14/15, note that we do not build in complete flow through of currency gains into our margin assumptions). We upgraded Wipro recently to ACCUMULATE (after running a negative call through FY09-13) and back further upsides, target price raised to Rs 530," says Emkay Global Financial Services research report.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. 
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
