Accumulate Wipro; target of Rs 600: Prabhudas Lilladher

Wipro's Q1FY17 revenues were in line with our expectations; however, margins and Q2FY17 guidance are disappointing. After reporting flat revenues on organic basis, the company has guided for flat-to-1% revenue growth in CC terms for Q2FY17. Revenue growth trajectory indicates significant challenges in business. FY17 organic  USD revenue growth will be ~3-4% YoY. IT services' EBIT margins at 17.8% are at a multi-year low and likely to recover gradually in H2FY17. Wipro is making investments in business to enhance the medium-term growth outlook However, that is having an adverse impact on margins in the short term. We now build in a gradual margin recovery in H2FY17 and FY18.

We revise down FY17/18 EPS by 3%/1% and revise TP to Rs600 (was 650) based on 15x (was 16x) FY18 EPS.For all recommendations, click here 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.