Hold Wipro; target of Rs 605: Religare

Religare's research report on WiproWPRO’s Q3FY16 IT services revenues grew 0.3% QoQ to US$ 1.83bn while CC revenues were up 1.4% QoQ. IT services margins came in at 20.2%, in line with RCMLe but 50bps lower QoQ due to lower utilisation and the Chennai flood impact. The Q4 US$ revenue growth guidance of 2-4%QoQ is healthy, but includes revenues of ~US$ 28mm from recent acquisitions (Cellent AG, Viteos Group). While WPRO has delivered better CC growth vs. peers this quarter, we see limited room for a re-rating in the absence of upgrades. Retain HOLD with a Mar’17 TP of Rs 605 (Sep’16 TP: Rs 625).Overall, Q3FY16 was an in-line quarter for WPRO but with a relatively soft organic guidance. While CC growth rates were better than peers this quarter, we think WPRO needs more sustained growth outperformance to drive a valuation re-rating. We marginally tweak estimates and roll over to a Mar’17 TP of Rs 605 (Sep’16 TP: Rs 625) set at 14.5x one-year forward earnings. Maintain HOLD.

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