Motilal Oswal 'Neutral' on Wipro; target of Rs 625

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26 Aug, 2025 12:21

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Motilal Oswal's report on WiproEstimates unchanged, growth uptick elusive thus far; Neutral: Our estimates are largely unchanged post the results. We are currently modeling 10.2% YoY growth in USD revenue for FY17, but this is hinged on to recovery in pain points, where WPRO’s performance remains hit-n-miss. Our target price of INR625 discounts FY17E EPS by 14x, and re-rating remains subject to sustained revenue traction. We maintain our Neutral stance on the stock.Valuation and viewWPRO has been actively investing over the last few years with the objective of reviving its growth closer to industry average. Lower utilization, higher S&M, and investments in capability building absorbed more than the tailwind from currency, and were potential levers as revenue growth came through. But growth has still languished in high single digits. Since 4QFY13, utilization is up ~550bp, currency has depreciated 17%, but EBIT margin in IT Services at 20.7% is only 70bp higher.Growth at WPRO has been driven by select segments - Healthcare, and Energy and Utilities among verticals and IMS among services. Healthcare grew around 20% YoY CC in FY15 and Energy & Utilities grew 10.2% YoY CC, despite pressure in the vertical in the last two quarters. IMS, even after factoring the impact of cross currencies, grew 19% YoY.WPRO’s broad-based traction of 2QFY16 was encouraging. With only Energy & utilities sluggish, there is visibility of that turning around at the turn of the year as the deals won in vendor consolidation exercise ramp up. But on the flip side, its guidance of 5.1-7.2% YoY CC in 3Q implies loss of momentum from 8.3-8.4% of the last three quarters. That limits conviction around growth recovery to industry average in the near term. Consequently, the relatively low valuation multiple fails to see re-rating just yet.The stock trades at 14.9x FY16E and 12.9x FY17E EPS. WPRO’s valuation discount to peers like TCS and INFO suggests a very attractive upside potential in the event of growth revival. However, amid flashes of broad based traction, overall growth trajectory does not appear to be changing structurally. Our target price of INR625 discounts FY17E EPS by 14x. Maintain Neutral. We remain watchful for: [1] any further correction in price and [2] Momentum in revenue from ramp-ups beginning Jan 2016 – and would be buyers in either instance, says Motilal Oswal research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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