Dolat Capital recommended reduce rating on Wipro with a target price of Rs 230 in its research report dated July 18, 2020.
Dolat Capital's research report on Wipro
Wipro reported 7.5% QoQ decline in CC Revenues (DART estm: 6.5% decline) led by broad-based decline across verticals with Retail and Communication severely impacted by 16.2% and 12.4% QoQ de-growth. OPM improved by 150bps QoQ for IT services at 19.0% largely lead by improved utilization (160bps QoQ) and cost control across expense items. (DART estm: 16.4%). New CEO & MD, Thierry Delaporte in his first address (joined a week prior) said is working on its renewed strategy that is focused more on growth and may see some impact on profitability based on need for investments. Apart from building vision, roadmap the new CEO has already shared his focus on near term operations and execution. Wipro’s expects stability in Communications, Retail and Tech verticals but has limited visibility on stability over other verticals. This coupled with slow decision making in deals implies uncertain outlook in near term and thus we expect sequential decline in its revenues/OPM.
We believe the commentary highlights continued limited visibility on recovery. Post the earnings, we expect 1.3% CAGR revenue de-growth over FY20-22E and 1.9% CAGR earning de-growth over FY20-22E. We maintain our Reduce rating with TP of Rs 230 (valued at 14x FY22E earnings – inline with its -1SD below its mean).
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