Sell Wipro; target of Rs 320: Dolat Capital Market

Dolat Capital Market's research report on Wipro

Wipro reported 2.0% QoQ CC revenue growth (DART estm: 1.3% growth) led by demand led broad-based growth across verticals. OPM improved by 20bps QoQ for IT services at 19.2% (DART estm: 18.9%) led by improved utilization (80 bps gain) and continued cost control but negated by Fx impact (60bps). Announced Buyback of Rs.95Bn at Rs.400/share (buying 4.2% equity at 6.6% Premium to CMP). Wipro re-introduced quarterly outlook with a growth guidance of 1.5% to 3.5% QoQ for Q3FY20 (partially led by continued momentum in volumes). Commentary turned positive (demand-led) with a robust pipeline and additional lever of supply side gains for coming quarters. New CEO & MD, Thierry Delaporte shared his strategic roadmap with 5 priorities (Exhibit 7) which shows focus on growth (stable margins) and transforming Wipro to a more client-focus operating structure.

Outlook

Factoring in positive commentary (demand-led), reintroduction of guidance with healthy traction and industry tailwinds provides near term comfort, driving up our revenue estimates by ~2% over FY20-22E and given sustained underperformance we maintain our Sell rating with TP of Rs.320 (valued at 16x FY23E EPS of Rs.20).