Neutral Wipro; target of Rs 257: Motilal Oswal

Motilal Oswal 's research report on Wipro

Wipro's ability to control costs and collections justifies the improvement in EBIT margin/cash conversion, despite the sharp drop in revenue. While full impact of the COVID-19 pandemic on pricing and Working Capital (WC) cycle is yet to play out, Wipro's outlook on managing margin stability (v/s Jun'20) and healthy cash conversions are impressive. In the current context, some of the verticals (Health BU) - earlier an overhang - should recover. Additionally, other factors in favor are playing out, such as (a) upside of a turnaround under a new CEO/strategy, and (b) possibility of large capital return. -We upgrade our FY21/FY22E EPS by 6%-12%, largely led by margin surprise. Before turning constructively positive on the stock, we await a refresh of the company's strategy and further evidence related to execution. Maintain Neutral.

Outlook

Before turning constructively positive on the stock, we await a refresh of the company’s strategy and further evidence related to execution. Maintain Neutral.

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