Reduce Wipro, recommends Dolat Capital
Dolat Capital continues to maintain its sector underperformer call on Wipro owing to its sustained underperformance in H1FY14 and discouraging outlook for FY14. The research firm has recommended a reduce rating on the stock in its October 22, 2013 research report.
October 24, 2013 / 15:43 IST
Dolat Capital's research report on Wipro
"We continue to maintain our sector underperformer call on Wipro owing to its sustained underperformance in H1FY14 and discouraging outlook for FY14 as evident from its Q3 guidance, weak employee growth (5 percent growth on LTM basis) and miss from its long held aspiration of growing inline with peers which still seems tough target to achieve. We believe that the growth rate would converge in FY15 for Tier I vendors but Wipro would still remain an underperformer given few drivers of growth in its portfolio. We recommend Reduce rating on the stock with a TP of Rs 500 valued at 14x FY15E earnings (15 percent discount to Infosys).""The results are inline with our estimates with a 3.2 percent QQ growth in constant terms. The growth in the quarter has been broadened across the verticals and geos but still not shown consistency in major parts (50 percent) of its portfolio. It has alluded on better prospects in the area of digital across verticals and across service line in the BFSI vertical. We believe sporadic nature of its growth lacks the confidence of a strong recovery in near term and thus does not see it getting its growth aligned with peers in FY15.""It has marked a 260bps gain in its OPM at 20.8 percent with a EBIT growth of 27 percent QQ ahead of our estimates, largely driven by operational efficiency and 250bps Fx tailwind. We believe it would be tough for Wipro to improve OPM hereon given its sustained investments needs in S&M (cost per employee is also growing) to shore up traction, declining profitability in product business and persisting attrition challenges. We have largely retained our estimates implying a Revenue/EPS CAGR of 16/15 percent over FY13-15E."Valuation: "We continue to maintain our sector underperformer call on Wipro owing to its sustained below par performance despite its three long years wait on the strategy revival. We largely maintain our estimates and have built in 16/15 percent Revenue/earnings CAGR over FY13-15E. We recommend Reduce rating on the stock, with a TP of Rs 500 valued at 14x of its FY15E earnings," says Dolat Capital research report.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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