ICICI Direct's research report on Wipro
Wipro reported a healthy set of Q2FY21 numbers. IT services revenues increased 2.0% QoQ in constant currency (CC) terms, above our estimate of 1.1% growth in CC terms. Geographically, revenue growth was led by Americas, RoW, which grew 2.2%, 3.7% QoQ, respectively. The IT service EBIT margin increased 30 bps QoQ to 19.3% vs. our estimate of 19.2%. Wipro guided that its Q3FY21E IT services revenues would be in the range of $2022-2062 million, translating to 1.5-3.5% QoQ growth. The company has declared a buyback of ~23.8 crore shares from its shareholders on a proportionate basis by way of a tender offer. The buyback price is Rs 400 per equity share payable in cash for an aggregate amount not exceeding Rs 9500 crore (~4.4% of market cap).
We expect Wipro to witness healthy revenue growth in coming years mainly led by healthy traction in deals, growth focus of new CEO, acquisition of new logos and traction in digital revenues. Further, we believe that improving growth along with cost rationalisation will keep margins buoyant. This, coupled with healthy capital allocation policy and improving tech spends on digital technology, prompt us to maintain our BUY recommendation on Wipro with a target price of Rs 435 (19x FY23E EPS).
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