Buy Wipro; target of Rs 697: Angel Broking

Angel Broking`s research report on Wipro“For 1QFY2015, Wipro announced a better-than-expected set of numbers. The company’s IT services segment posted a revenue of US$1,740.2mn (V/s an expected US$1,730.6mn), up 1.2% qoq. In constant currency (CC) terms the revenue growth was of only 0.3% qoq. At the consolidated level, the company recorded a revenue of Rs11,136cr (V/s an expected Rs11,220cr), down 4.4% qoq. The EBIT margin stood at 20.4% (V/s an expected 21.2%) a dip of 135bp qoq. Thus, the PAT came in at Rs2,103.2cr (V/s an expected Rs2,049.1cr), down 5.5% qoq. For 2QFY2015, the company has guided for IT services revenue growing to US$1,770-1,810mn (at USD/INR exchange rate of 59.66), which implies a growth of 1.7-4.0% qoq.We maintain our Buy rating on the stock with a target price of Rs697.” “For 1QFY2015, Wipro’s IT services segment posted a revenue of US$1,740.2mn (V/s an expected US$1,730.6mn), up 1.2% qoq, with IT services operating margin (EBIT) at 22.8%. At the consolidated level, the company recorded a revenue of Rs11,136cr (V/s an expected Rs11,220cr), down 4.4% qoq. The EBIT margin stood at 20.4% (V/s an expected 21.2%), a dip of 135bp qoq. Thus, the PAT came in at Rs2,103.2cr (V/s an expected Rs2,049.1cr), down 5.5% qoq. The Management remains confident of the revenue growth pick-up sustaining, citing a pick-up in large deal closures and win rates, uptick in discretionary spending, strong business pipeline and momentum in demand from US sustaining. Wipro is now better positioned than it was three years ago to capture upsides from overall market improvement and would possibly be able to reduce the gap in revenue growth with its peers. We expect USD and INR revenue CAGR for IT services to be at 15.8% and 15.4%, respectively, over FY2014-16E. The stock is currently trading at 15.8x FY2015E and 14.1x FY2016E EPS, which is at a huge discount to its peers. We recommend a Buy rating on the stock with a target price of Rs697,” says Angel Broking research report.  

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