Buy Wipro; target of Rs 680: ICICIdirect

ICICIdirect.com's report on Wipro

IT services constant currency (CC) revenues grew 1.2% QoQ (1-3% guidance) while dollar revenues declined 1.2% QoQ to $1,774.5 million (-0.3% QoQ, $1,791 million estimate)

IT services EBIT margins improved 23 bps QoQ to 22%, above our 21.4% estimate. Reported PAT of Rs 2,272 crore was also above our Rs 2,085 crore estimate

Wipro gave Q1FY16E revenue growth guidance of $1,765 million to $1,793 million (-0.5 to 1% QoQ growth)

"We estimate Wipro will report slower revenue and EPS CAGR of 5% and 7% during FY15-17E (average 22.2% IT services EBIT margins in FY16-17E), vs. 12%, 14%, reported in FY10-15 (average 22.1% margins), respectively, led by weakness in energy vertical (15.5% of FY15 revenues) but helped by client mining and deal wins. However, soft Q4FY15 earnings and weaker than anticipated Q1FY16E guidance lead to estimate and target price revision (Rs 680 vs. Rs 720), despite maintaining our target multiple. That said, we maintain our BUY rating", says ICICIdirect.com research report.

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