Wipro Ltd. share price target

Wipro Ltd is a leading India based provider of IT Services, including Business Process Outsourcing (BPO) services, globally. Further, Wipro has other businesses such as IT Products, Consumer Care and Lighting...

Operating profit declined 5.0% YoY, as operating margin contacted 143bps YoY to 17.6%. However, on QoQ basis, operating profit grew 1.9% QoQ, led by margin expansion for IT Services (+0.3% QoQ) on...

Wipro's growth continues to lag within the Tier-1 IT, but its relative growth underperformance has reduced with growth moderation of larger peers. We reckon that growth will continue to lag peers ahead based on soft outlook on ~50% of rev comprising BFSI, Communications and Technology (Hi-Tech sub-segment). This is expected to be offset by relatively better outlook in Consumer (e-commerce), Healthcare (HPS revival) and Manufacturing (healthy deal pipeline). The soft guidance for 4Q indicates that reaching industry level growth is an uphill task. While growth concerns remain (BFSI/large accounts-led), there is limited scope for margin expansion (higher localisation). We expect USD revenue growth of 2.2/5.9/6.0% and IT services EBIT% at 18.4/18.2/18.3% for FY20/21/22E. The stock is up ~6% in 3M and valuations are at ~14.0x FY21E (vs. 15.2x Tier-1 IT median). Risk to our thesis includes improved US/Europe macro and INR depreciation. We maintain NEU on Wipro post in-line revenue, better margin performance and lower than expected guidance. Continued headwinds in BFSI and large accounts offset the improving outlook in Consumer and Manufacturing verticals. Our TP of Rs 235 (unchanged) is based on 12x Dec-21E EPS.

Wipro (WPRO) reported an in-line operating performance in Q3FY20 with 1.8% QoQ CC revenue growth and 18.4% IT services EBIT margins.

We largely maintain our FY20/21E revenue/EPS forecast. We forecast IT services revenue (in US$) and EPS CAGR of 4% and 6.8% respectively over FY19-21E. We maintain ACCUMULATE recommendation and TP of Rs269 based on PER of 15x FY21E. Key Highlights and Investment Rationale Q3FY20 IT services revenue growth of 1.8% QoQ in CC This was in-line with our forecast of 1.5% QoQ growth and at mid-point of WPRO's guidance of 0.8%-2.8% QoQ growth. Revenue growth in US$ terms was 2.2% QoQ. Digital solutions (39.8% of revenue) grew by 22.8% YoY....

PAT was down 3.2% YoY to Growth in key verticals like BFSI (+0.4% QoQ CC) and ENU (1.2% QoQ CC) was soft during the quarter. However, verticals like Consumer (+7% QoQ CC), Health (+3.4% QoQ CC) and Manufacturing (+4.4% QoQ, CC) delivered strong growth on the back of the good performance in some sub-segments. In consumer BU, some sub-segments like e-commerce have driven growth during this quarter. This was led by [i] challenges in the semiconductor sub-vertical due to the US-China trade war and [2] higher furloughs in some of the top accounts Growth in key verticals like BFSI (+0.4% QoQ CC) and ENU (1.2% QoQ CC) was soft during the quarter. However, verticals like Consumer (+7% QoQ, CC), Health (+3.4% QoQ, CC) and Manufacturing (+4.4% QoQ, CC) reported strong growth on the back of the good performance in some sub-segments.

Wipro reported an in line quarter on all fronts. In constant currency, global IT services revenues grew 1.8% sequentially (ITI acquisition contribution 0.3%) while EBIT margins expanded 30 bps QoQ to 18.4%. Key highlights of the quarter were: 1) Digital (39.8% of revenue) grew at 2.8% QoQ, 22.7% YoY, 2) decline in voluntary attrition to 15.7% (vs. 17.0% in Q2) and 3) Addition of one client QoQ in US$100 million+ bucket. Besides the...

Wipro Ltd.s consolidated operating margin and profit beat estimates in a quarter where the company absorbed the impact of wage hikes and its core IT services business witnessed subdued growth. Consolidated sales of Wipro for the quarter ended Sep 2019 registered a growth of 2% from Rs 14786 crore in the sequential previous quarter ended June 2019. OPM expanded by marginal 60...

Revenue for Q2FY20 witnessed slow growth both YoY and sequentially (4.0% YoY/2.8% QoQ) in contrast to last quarter's topline performance. Though being the strongest performer historically, BFSIs revenue this quarter was below expectations with a muted revenue growth of 3.6% YoY. The management highlighted that it was mainly due to macroeconomic conditions and lower spending by banking and capital market clients and completion of large digital projects. Energy and Utilities segment grew by 3.6% YoY (6.3% CC) while Health Business Unit had a positive revenue growth of 3.36% YoY (0.58% QoQ), which was in contrast to last quarter's performance....