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Buy Wipro target of Rs 728: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Wipro has recommended buy rating on the stock with a target price of Rs 728 in its research report October 14, 2021.

October 14, 2021 / 02:05 PM IST
 
 
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Prabhudas Lilladher's research report on Wipro


IT services revenue of $2.58 bn, 8.1% QoQ CC, 6.9% QoQ USD is above our and cons estimates (Ple: 6.6%, Cons: 6.4%). Organic growth was also robust at 4.6% QoQ CC. Capco acquisition performed well contributing US$236 mn to revenues from US$154 mn in Q1FY22 (for two months). Growth was broad-based across verticals and markets. Wipro signed 9 large deals this quarter with TCV of around ~$580 mn (vs $715 mn in 1Q21) ACV jumped 28% YoY in H1FY22 while TCV grew 19% YoY in the same period. TCV was lower on QoQ basis due to absence of large or mega deals. However, management is confident of strong demand environment with quality of pipeline improving every quarter. Margin performance was resilient with consolidated EBIT margin at 17.3%, -111bps QoQ (Ple: 17.4%, 16.8%) despite headwinds from Capco and Ampion acquisitions, wage hikes for 80% of employees starting Sep 21 and investments in sales. Full 3-months impact of wage hike will be reflected in Q3FY22. Margin beat was led by Rs673 mn decline (60 bps contribution to margins) in D&A as intangibles were fully amortized for some of the old acquisitions. Hiring continued to be strong with net headcount addition of 11,475, 5% QoQ. LTM attrition inched up by 500bps QoQ to 20.5% given strong demand for talent. Management mentioned that attrition is expected to inch up further in next few quarter before it stabilizes.



Outlook


We arrive at DCF based TP of 728 (implied target multiple of 24.6x P/E on FY24 EPS) Wipro is currently trading at 26.2X/22.7X for FY22/23E earnings of INR25.7/29.7 respectively with Revenue/EPS CAGR of 16.9%/15.8% for FY21-24 respectively. Maintain Buy.


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first published: Oct 14, 2021 02:05 pm

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