KR Choksey has given Buy recommendation for Wipro with a target price of Rs. 794 in its research report issued on Jan 14, 2022

KR Choksey’s research report on Wipro

Dollar Revenue was up 2.3% QoQ and in CC term grew by 3% QoQ to USD 2,640mn (KRChoksey est. USD 2,678Mn). Rupee revenue grew by 3.3% QoQ to INR 203,163Mn (KRChoksey est. INR 203,621Mn). Reported operating margin was down of 85bps to 16.9% QoQ due to two months of incremental impact of salary hikes and lower utilization, partly offset by continued revenue growth momentum and operating efficiencies. Wipro has highlighted that several large deals are in pipeline but the phase-wise large transformation may lead to limited large closures. The large deal pipeline is robust but Wipro closed more mid-sized deals in the quarter. TCV was up 37% YoY and ACV was up 28% in YTD, providing growth visibility. Higher fresher intake (~10K in Q3) will offset the impact of attrition surge however the ongoing talent crunch and rise in discretionary cost will keep margins under check.

Outlook

Wipro is currently trading at a valuation with a P/E multiple of 23.1x/20.9x on FY23E/FY24E earnings. We expect strong deal momentum across verticals, growth focused and clients centric approach and new management strategy will aid growth over the medium to long term in future and hence we are assigning a P/E multiple of 26x to the FY24 estimated EPS of INR 30.5 to arrive at a target price of INR 794 per share, an upside of 24% over the CMP. Accordingly, we upgrade our rating to an “BUY” from “ACCUMULATE” rating to the stock.

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