Hold Wipro; target of Rs 240: Emkay Global Financial

Emkay Global Financial recommended hold rating on Wipro with a target price of Rs 240 in its research report dated July 14, 2020.

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July 20, 2020 / 12:32 IST

26 Aug, 2025 12:21

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Emkay Global Financial's report on Wipro

Wipro’s cc revenue declined 7.5% QoQ in the June’20 quarter, compared to a 6.7% fall estimated by the Street and 5% by Emkay. In a positive surprise, IT Services’ EBIT margins improved qoq to 19% (our estimates of ~50bps fall/Consensus of 150bps fall) aided by sharp reduction in manpower expenses and lower travel and subcontracting costs. Wipro did not provide a formal revenue outlook for the Sep’20 quarter. It aims for stability and holding margins in a narrow range going forward. Cash generation picked up sharply after hit by prepayment of salaries in the Mar’20 quarter. We raise FY21-23E EPS by 1.4%-3%, primarily led by higher margin assumptions even as revenue estimates remain broadly unchanged.

Outlook

We had upgraded the stock on valuations in March’20 on inexpensive valuation in the Mar’20 quarter and retain the rating with a revised TP of Rs240, based on an increased 13x June’22E EPS (vs. 12x earlier). We continue to find valuations attractive relative to peers, notwithstanding long-standing growth challenges that could provide further tactical upsides for the stock.

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