Neutral Wipro; target of Rs 385: Motilal Oswal

Motilal Oswal 's research report on Wipro

Wipro reported better-than-expected revenue growth for the quarter (2% QoQ CC v/s est. 0.5%). Broad-based recovery across verticals, continued margin resiliency, and strong cash generation were the key positives for the company. A robust deal pipeline and improved demand present an encouraging outlook. Management guidance for revenue growth (1.5–3.5% QoQ CC) in 3QFY21 stands above our estimate of 0–2%, which is another key positive. The key contours of the new CEO’s refreshed strategy – growth from focused sectors/markets, continued investment in talent, and a simplified operational model to help improve focus on customers - seem to be steps in the right direction. We upgrade our FY21/FY22E EPS by 3%/2%, largely led by a revised revenue outlook based on guidance. Maintain Neutral as we await further evidence of execution of Wipro’s refreshed strategy and a successful turnaround from its growth struggles over the past decade before turning more constructive on the stock. Our TP implies 20x FY22E EPS (30% discount to TCS).

Outlook

We upgrade our FY21/FY22E EPS by 3%/2%, largely led by a revised revenue outlook based on guidance. Maintain Neutral as we await further evidence of execution of Wipro’s refreshed strategy and a successful turnaround from its growth struggles over the last decade before turning more constructive on the stock. Our TP implies 20x FY22E EPS (30% discount to TCS).

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