Hold Wipro; target of Rs 420: Emkay Global Financial

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Emkay Global Financial's report on Wipro

Wipro reported in-line revenue at USD2.1bn (3.4% QoQ CC). IT services EBITM surprised positively, expanding 240bps QoQ to 21.7% (270bps ahead of our expectations), led by revenue acceleration, high offshoring (52.7% vs 50.4% QoQ) and operating efficiencies. The new simplified and leaner operating model was implemented across the organization from Jan 1, 2021, under which the number of P&Ls will be reduced to 4 from 26. It will help in faster decision making, more effective go-to-market and client centric approach. The company has guided IT Services revenue to be in the range of USD2,102-2,143mn in Q4, implying 1.5% to 3.5% growth QoQ. It expects salary hike and investments in frontend sales and domain capabilities to impact margins in Q4. We raise FY21/22/23E EPS by 9.7%/10.9%/10.4% as we factor in Q3 performance, better EBITM and robust deal signings.

Outlook

Wipro has shown better performance in Q3; however, weakness persists in client metrics. Given rich valuations and patchy performance in the past, we maintain Hold with a revised TP of Rs 420 (earlier Rs 380).

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