Prabhudas Lilladher's research report on Wipro
Wipro’s revenue grew at 2% QoQ CC (Ple: 1.5%, Cons: 1.6%) & 3.7% QoQ in reported terms. Revenue growth was broad based with 5.6% QoQ rise in Consumer BU (retail segment), 5.4% QoQ growth in BFSI, 5.2% QoQ growth in Health BU and 7.8% QoQ communications. Revenue growth was led by BPO that grew 8.1% QoQ. EBIT margin performance was better than our expectations. EBIT margins at 18.7% (+70bps QoQ, +109bps YoY) and IT services EBIT margins at 19.3% (+30bps QoQ) slightly ahead of our and street estimates 19% underscores the new CEOs focus of profitable growth. Guidance was way better than our estimates at 1.5%-3.5% QoQ for Q3FY21. The new CEO has outlined new strategic direction, 1) Growth focus, prioritize investments in areas of competence and scale, 2) have offerings that address a wider spectrum of decision makers, 3) augment talent pool and simplification of operating model. We have increased our estimates by avg 6% for FY22/23 which were led by 1) Strong guidance, 2) Sustainable margin performance along with growth, 3) Strong Demand trend, 4) Strong exit rate in FY21.
We value Wipro on Sep-22 earnings of 20X (earlier:18X) to arrive at changed TP of INR 415(earlier: INR350). Wipro is currently trading at 19X/17X for FY22/23E earnings of INR 19.8/21.7 respectively with EPS CAGR of ~14% for FY21-23 respectively. Maintain Buy.