Buy Wipro; target of Rs 350: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Wipro

As indicated in the Q2FY18 earnings commentary, the management is firm on its expectation of reaching industry growth rates by Q4FY18. The confidence of catching up is on the back of better client mining, increasing contribution towards digital and demand across certain business segments. Furthermore, adapting to changing industry trends, the company has embarked on its transformational journey by directing its strategy into six themes -Digital, non-linearity, partner eco-system, integrated services, hyper automation and localization. In this direction, Wipro has invested over US$1 billion in acquisitions in the last 18 months with digital now contributing 24.1% to revenues. Early signs on this front are visible with top 10 clients growing at 8.1% YoY in Q2FY18 on top of 1.5% YoY growth in Q1FY18 and after consistent negative growth from Q3FY15 to Q4FY17. On the demand side, the management sees strength in the BFSI vertical and stability in demand in the consumer verticals as these two verticals are adopting digital ahead of the industry.

Outlook
The management commentary is turning positive on an incremental basis on the back of strength in the BFSI segment, improving client metrics and digital capabilities. With early signs of recovery visible on these fronts, the management has maintained its stance of matching industry growth by Q4FY18. At the CMP, the stock is trading at attractive valuation of 13x FY20E EPS and offers FCF yield of 4%. Historically, Wipro has traded at 35% discount to TCS due to its weak performance compared to its peers. Given its transformation journey directed into the digital and non-linear path and better client mining, the discount has narrowed down to 18%. Going ahead, Wipro is expected to match industry growth. Consequently, we upgrade our recommendation on the stock to BUY. We roll our estimates on FY20E and value Wipro at Rs 350 (15x FY20E EPS).
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