Buy Wipro; target of Rs 460: Emkay Global Financial

Emkay Global Financial's research report on Wipro

Wipro reported mixed operating performance in Q2, wherein revenue growth was a tad better than expectations, while margins disappointed. Management remain cautiously optimistic on growth prospects, and are closely monitoring the possible impact of macro uncertainties on demand. Company signed 11 large deals with combined TCV of USD0.7bn in Q2. Overall order book in TCV terms grew 23.8% YoY in Q2. The company has guided to 0.5-2% QoQ CC revenue growth in IT Services for Q3, broadly in line with our expectations of 0-2%. EBITM has expanded 10bps to 15.1% in Q2, but came in lower than our expectations and is likely to remain in the narrow range in Q3. Commentary by Management remains fairly confident on double-digit revenue growth in FY23. However, it shied away from giving any timeline on the margin returning to the medium-term target range of 17-17.5% which remains an irritant. We cut our earnings by 0.2% to 3.9% for FY23E-25E, factoring-in the Q2 performance. Lack of clarity on margin recovery is expected to weigh on valuation, in our view.

Outlook

We maintain BUY on the stock, with TP of Rs460/share at 17x Sep-24E EPS (earlier Rs470).