Prabhudas Lilladher has given Buy recommendation for Wipro with a target price of Rs. 737 in its research report issued on Jan 13, 2022

Prabhudas Lilladher’s research report on Wipro

Wipro reported miss in IT services revenue of $2.64 bn, 3% QoQ CC (Ple: 4.2%, Cons: 4.1%); after four quarters of outperformance. Growth was within guided range of 2-4% QoQ CC and miss was led by decline of 3% QoQ USD in E&U vertical. Wipro closed 11 large deals resulting in a TCV of over $ 600 million. (vs $580 mn in Q2FY22 and $1200 mn in Q3FY21). Order book in ACV terms grew 27% on YTD basis. Bookings in the range $10-30 mn grew 50% YoY this quarter. Change in leadership has brought in sharp focus on winning deals leading to improving win-rate by 300bps in FY22. Client addition of 7 in $100 Mn+ category, 5 in $75 Mn+ and 9 in $50 Mn+ YoY is also impressive. Consolidated EBIT margins came at 16.9%, -37bps QoQ above our estimates but below consensus estimates (Ple: 16.7%, 17.5%). IT services operating margin was at 17.6%, -19 bps QoQ. Margins remained resilient despite 2-months impact of wage hike rolled out in Sep21 and were slightly above guided range of 17-17.5%. Hiring continued to be strong with net headcount addition of 10,306 +5% QoQ, +22% YoY. Strong fresher intake, 70% more freshers in FY22 vs FY21, will provide pyramid optimization benefits in FY23. LTM attrition inched up by 220bps QoQ to 22.7%. Management mentioned that quarterly attrition has stabilized in Q3 and expect it to moderate in coming quarters. We believe that attrition may peak out in Q4 and stabilize thereafter. There is scope for margin expansion in FY23 with attrition related cost pressures subsiding, pyramid optimization benefits coming in and revenue growth leverage.

Outlook

Our Revenue estimates cut by 1.5% for FY23/24E led by miss in revenue in Q3FY22. Our estimates remain intact due to resilient margin performance. We arrive at DCF based TP of 737 (implied target multiple of 24.8x P/E on FY24 EPS) Wipro is currently trading at 26.8x/23.3x on FY22/23E earnings of INR25.8/29.7 respectively with Revenue/EPS CAGR of 11.6%/16.6% for FY22-24 respectively. Maintain Buy. Any sharp sell-off in the stock should be looked upon constructively.

More Info on Trent

At 17:30 Wipro was quoting at Rs 649.85, down Rs 41.50, or 6.00 percent.

It has touched an intraday high of Rs 666.00 and an intraday low of Rs 648.00.

It was trading with volumes of 1,817,154 shares, compared to its thirty day average of 554,534 shares, an increase of 227.69 percent.

In the previous trading session, the share closed down 0.40 percent or Rs 2.75 at Rs 691.35.

The share touched its 52-week high Rs 739.80 and 52-week low Rs 398.00 on 14 October, 2021 and 25 March, 2021, respectively.

Currently, it is trading 12.16 percent below its 52-week high and 63.28 percent above its 52-week low.

Market capitalisation stands at Rs 356,203.09 crore.

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