July 21, 2016 / 17:39 IST
Axis Direct's research report on Wipro
Wipro delivered better revenue but lower EBIT margin. Absence of broad-based growth (only Healthcare among verticals, BPS among services delivered) was disappointing. Also, Q2FY17 guidance of 0-1% QoQ is below our expectation of 1.5%to 3.5%. Management expects to largely offset the impact of salary hikes (2 months) in Q2.
Weak revenue guidance for Q2, ongoing restructuring in India/ ME business and macro headwinds lead us to reduce our FY17E/FY18E USD revenue growth to 8%/10% (earlier: 10%/ 11%). Revised EPS stands at Rs 36/ Rs 38 for FY17E/ FY18E after adjusting for buyback of 40 mn shares. Our revised target price stands at Rs 497 (13x FY18E EPS, earlier: Rs 558). Given 10% downside from CMP of Rs 549, we rate Wipro as a SELL (vs. HOLD earlier). The stock trades at 16x/15x FY17E/FY18E.
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