Prabhudas Lilladher has given Buy recommendation for Wipro with a target price of Rs. 616 in its research report issued on Apr 30, 2022
Prabhudas Lilladher’s research report on Wipro
Wipro’s Q1FY23 revenue growth guidance of 1-3% QoQ CC (vs 2-4% QoQ for past 2 quarters) is weaker than consensus expectations. Management mentioned about robust order book ACV (up 30% YoY in FY22 and 38% YoY in Q4FY22) and deal pipeline, then further guided for double digit growth in FY23. Though growth in ACV is strong, TCV of $400mn (-33% QoQ) in Q4FY22 is soft. Wipro’s new strategy and investments are progressing well – 1) 60 synergy deals with Capco, 2) 16% more senior leaders closer to clients and 3) 30% YoY growth in cloud ecosystem in FY22. However, material large/mega deal wins or increase in organic revenue guidance from 2QFY23 will be key triggers for the stock going forward.
We cut EPS estimates by ~7.5% for FY23/24 led by cut in EBIT margin by ~120bps/110bps for FY23/24, due to margin pressures from higher manpower costs and investments in sales & technology capabilities. We arrive at DCF based TP of Rs. 616 (earlier 735) with implied target multiple of 23x P/E on FY24 EPS (earlier 25x). Wipro is currently trading at attractive valuations of 21x/19x on FY23/24E earnings of Rs. 24/27 respectively with Revenue/EPS CAGR of 11%/12% for FY22-24. Maintain Buy.