Buy Wipro; target of Rs 300: ICICI Direct
ICICI Direct is bullish on Wipro recommended buy rating on the stock with a target price of Rs 300 in its research report dated July 15, 2020.
July 20, 2020 / 01:16 PM IST
ICICI Direct's research report on Wipro
Wipro’s revenue growth has lagged industry growth mainly due to a higher drop in legacy revenues, lower growth in digital revenues (28% over FY18-20) vs. Infosys (34% CAGR) and lack of aggressive hunting & acquisition of new logos. We believe Wipro has all the key ingredients of robust growth in the long run. The company has strong full services capabilities across applications, infra, BPS and engineering, which should help it as integrated deals gain prominence. Wipro has a strong balance sheet to craft more complex deal structures, undertake captive buyout opportunities and has durable client relationships to benefit from vendor consolidation. Further, the induction of a new CEO with focus on profitable growth and its immense experience in IT field make us positive on the company’s future growth. Hence, we expect Wipro could see healthy improvement in revenue growth, which is key to its re-rating. This, coupled with reasonable valuations, prompt us to be positive on the stock from a long term perspective.
We expect Covid-19 disruptions to impact revenues in the near term. However, considering the margin improvement in Q1FY21E and improvement in growth from Q2FY21E, we expect margins to witness expansion in FY21E, FY22E. Further, we expect Wipro to witness healthy growth revenue in coming years mainly led by healthy traction in deals, growth focus of new CEO, acquisition of new logos and traction in digital revenues. This, along with reasonable valuation (~13x FY22E EPS) prompts us to maintain BUY on Wipro with target price of Rs 300 (16x FY22E EPS).
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