Hold Wipro; target of Rs 418: Prabhudas Lilladher

Prabhudas Lilladher's research report on Wipro

Wipro reported miss on both revenue and margins in Q1FY23. It reported revenue growth of 2.1% QoQ CC, 90bps/70bps lower than our/cons estimates. Growth includes one-month contribution from Rizing acquisition. Wipro provided revenue guidance of 3-5% QoQ CC for Q2FY23. Though guidance is higher than previous quarter, unfavorable currency movement (depreciation of EUR, GBP, AUD vs USD) during the quarter will lead to lower revenue growth in USD. Wipro’s investments in large deal team is showing results with 32% YoY growth in TCV this quarter vs ~$575 mn quarterly run-rate in FY22. Whether it can sustain TCV at this level will be the key thing to monitor going forward. IT services margins declined 200bps QoQ to 15% (Ple: 16.5%) and is expected to remain muted due to quarterly promotion cycle (1st July) and wage hikes (1st Sept) ahead.

Outlook

We cut EPS estimates by ~10%/5% for FY23/24 led by 2% cut in revenue estimate and cut in EBIT margin by ~120bps/60bps for FY23/24. We continue to value Wipro at 17x (FY24 EPS) to arrive at TP of Rs. 418. Wipro is currently trading at 19x/17x on FY23/24E earnings of Rs. 21/25 respectively with Revenue/EPS CAGR of 9%/5% for FY22-24. Maintain Hold.

More Info

At 12:55 hrs Wipro was quoting at Rs 415.55, up Rs 3.35, or 0.81 percent.

It has touched an intraday high of Rs 417.50 and an intraday low of Rs 402.40.

It was trading with volumes of 1,154,333 shares, compared to its thirty day average of 574,760 shares, an increase of 100.84 percent.

In the previous trading session, the share closed up 1.63 percent or Rs 6.60 at Rs 412.20.

The share touched its 52-week high Rs 739.80 and 52-week low Rs 391.00 on 14 October, 2021 and 15 July, 2022, respectively.

Currently, it is trading 43.83 percent below its 52-week high and 6.28 percent above its 52-week low.

Market capitalisation stands at Rs 227,820.06 crore.

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Wipro - 210722 - prabhu