Hold Wipro; target of Rs 340: JM Financial

JM Financial's research report on Wipro

Wipro (WPRO) reported 2QFY19 that was a tad above expectations; the 0-2% QoQ USD revenue growth guidance (JMFe, adjusted for incremental revenues in the USD 1.5bn/10-years Alight Solutions deal) was on expected lines. Organic digital revenues grew 11% QoQ (30% YoY), on our estimates; management indicated a strong demand for cloud migration services. However, the presence of multiple moving parts – divestment of data center business, Alight acquisition and the planned carving out of domestic public sector business – lower the visibility of the internal construct. Further, the outlook for Healthcare vertical (13% of revenues) remains uncertain. Thus, we stay neutral. That said, we believe the stock’s modest valuation (13.5x FY20F EPS; 12/13% discount/premium to INFO/HCLT) and attractive FCF yield (5%+) could spark a short-term play.

Outlook

Our INR 340 PT (unchanged) is at 14x target PER.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More