Motilal Oswal is Neutral on Wipro; target Rs 600

Motilal Oswals's research report on WiproAs has been the case in recent years, WPRO’s dampener of a 1Q guidance yet again ruled out the likelihood of growth gap to peers bridging in the full year. Its 1-3% QoQ CC guidance for revenue growth in 1QFY17 implies organic growth guidance of -1% to +1% as per our estimates. Assuming 0% at the midpoint, even a 3% CQGR in the remainder of the year will leave the company with 6% organic growth in CC in FY17. Growth underperformance to peers is only a part of revenue concern at WPRO. What is also notable is that the single digit CC organic growth is lopsided in favor of India / Middle East (+20.7% YoY CC in FY16) and APAC (+11% YoY CC), whereas Americas grew 8.5% and Europe was flat. Lest that is addressed, even the margins will be at risk. We now expect USD revenue CAGR of 9.6% over FY16-18 and earnings CAGR of 7.8%. Likely continued revenue underperformance in FY17 curtails optimism at relatively lower valuation to INFO and TCS. Our target price of INR600 discounts forward earnings by 14x. Maintain Neutral.

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