Wipro Ltd. share price target

We upgrade Wipro to Buy from Sell as they are managing costs well, delivering solid cash flows, new CEO, potential buyback & inexpensive valuations. Wipro has surprised us consistently with margin defense. We have raised our earnings estimates by 12%/9% for FY22E/23E led my margin upgrade & now...

Wipros ability to control costs and collections justifies the improvement in EBIT margin/cash conversion, despite the sharp drop in revenue. While full impact of the COVID-19 pandemic on pricing and Working Capital (WC) cycle is yet to play out, Wipros outlook on managing margin stability (v/s Jun20) and healthy cash conversions are impressive. Additionally, other factors in favor are playing out, such as (a) upside of a turnaround under a new CEO/strategy, and (b) We upgrade our FY21/FY22E EPS by 6%-12%, largely led by margin surprise. As the company enters 2QFY21, deal activity is expected in Consumer, Technology and Communications while it remains cautious in In BFSI, there is good demand around RTB and cost optimization spends. As the company enters 2QFY21, deal activity is expected in Consumer, Technology and Communications while it remains cautious in other verticals. Thought visibility has improved slightly (v/s Mar20), management has refrained Near-term focus is on tightly controlling incremental spends.

While concerns about the travel & transport vertical (<5% revenue share for tier-I India IT) are at the forefront, we believe retail the second largest vertical with 14% share will be the worst hit for India IT services.

The company has not provided for 1QFY21E guidance, citing uncertainty. We cut our EPS estimates by 0.9/1.5% for FY21/22E. Our TP of Rs 185 is based on 11x FY22 EPS. We maintain REDUCE rating on Wipro based on lower than expected revenue and margin performance. Covid-19 related global slowdown will lead to cut in discretionary spending, pricing discounts and postponement of large deals wins. Headwinds in BFSI (Medium term), stress in Manufacturing (Auto) and ENU (Energy) will offset the improving outlook in Healthcare and Communication.

As expected, WPRO has not given revenue growth guidance for Q1FY21 given the uncertainties as regards the impact of Covid-19 pandemic. It plans to take strong cost control measures to deal with the same. On the positive side, WPRO confirmed that the...

Covid-19 led disruption to continue to impact business In the near term, the company has indicated that its clients could curtail discretionary spend (to conserve cash in the near term) and restructure existing projects. Further, Wipro expects pricing pressure to impact near term revenues. There is uncertainty in terms of pricing, demand, which has led the company to refrain from giving guidance. Key sectors expected to be impacted are retail, travel, hospitality and manufacturing (especially auto and its supply chain). Further, we believe there may be secondary impact on...

Wipro (WPRO) reported a subpar Q4FY20 with a miss on both revenue and operating margins.

Nifty IT index has corrected 16% since last one-month factoring in potential demand shock from COVID-19 spreading to key client markets (US/ Western Europe) along with oil price shock and potential impact on global growth. The COVID-19 crisis in our view will have more severe impact on global economy than GFC as its severity is increasing on day-to-day basis. As Indian IT growth expectation is anchored to global economy, COVID-19 could derail it...

The spread of Covid-19 has led to lockdowns in many countries globally and could have adverse economic implications. In addition, the recent fall in crude prices could also have an adverse impact of fiscal health of oil producing countries. As a result, IT companies, which have considerable exposure to verticals such as oil, energy & utilities; banking & capital markets; manufacturing and travel & transport could see an adverse impact from the ongoing crisis. Companies like Wipro, Infosys in large cap and MindTree, NIIT Tech, Sonata software, Cyient, Accelya Solutions among...

Same Story Goes on: Wipro came up with yet another weak quarter with muted Q4FY20.