Motilal Oswal has given Neutral recommendation for Wipro with a target price of Rs. 455 in its research report issued on Apr 16, 2021
Motilal Oswal’s research report on Wipro
Wipro (WPRO) reported an in line 4QFY21 revenue growth of 3% QoQ in CC terms in IT Services, near the higher end of its guidance band (1.5-3.5%). EBIT margin dipped 70bp to 21% due to a partial wage hike, but was ahead of our expectation of 20.4% on better cost control. – It reported 12 large deals (over USD30m) and a TCV of USD1.4b in 4QFY21, including one large deal of over USD0.5bn in Americas (expandable to USD1bn). Order book in 2HFY21 was up 33% YoY to USD7.1b, with a large deal TCV of USD2.6b. – Despite a very strong order book and ramp up in two mega deals (we estimate ~200bp QoQ impact), its 1QFY22 revenue growth guidance was unexciting at 2-4% QoQ CC. Excluding the mega deals, this implies no growth at the lower end, which is weak even after adjusting for seasonality. This, in our view, is exacerbated due to WPRO’s continued struggle with account mining, despite impressive performance in bagging accounts. We lower our FY22E EPS by 6%, largely based on upcoming margin headwinds and EPS impact from the Capco acquisition. Our estimate for FY23E largely remains unchanged.
We maintain our Neutral stance as we await: a) further evidence of execution of WPRO’s refreshed strategy, and b) successful turnaround from its growth struggles over the last decade before turning more constructive on the stock. Our TP implies 19x FY23E EPS.