Hold Wipro; target of Rs 420: Sharekhan

Sharekhan's research report on Wipro

For Q3FY23, Wipro’s IT services revenues grew by 6.2% y-o-y to $2,803.5 million, while in CC terms, the revenues grew of 0.6% q-o-q and 10.4% y-o-y below our estimates of 1% q-o-q. IT services’ EBIT margins expanded by ~120 bps sequentially to 16.3%, ~100 bps above our estimates, led by strong operational improvements and automation-led efficiencies which negated the impact of salary hikes and promotions. Total bookings stood at $4.3 billion at the end of the December quarter, up 26% y-o-y. For the quarter, it closed 11 large deals, resulting in a TCV of over $1 billion, up 69%. Management acknowledged the continuity of macro-economic uncertainty and softness in retail vertical but believes that technology spending is still robust and expects strong bookings in Q4 as well.

Outlook

Given looming global headwinds, the outlook for FY24E looks uncertain and with gradual recovery in the coming quarters. However, we believe the structural growth story for the Indian IT sector remains intact. We maintain a Hold rating on Wipro with unchanged PT of Rs. 420, given muted guidance despite strong deal bookings and a robust deal pipeline.

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