Shares of Wipro surged 10 percent on January 15 to hit a fresh 52-week high as the company’s December quarter earnings beat estimates, and its American Depository Receipts (ADRs) surged almost 18 percent to hit a near-20-month high of $6.35 after the company reported its results on January 12.
Wipro’s net profit fell 12 on-year to Rs 2,694 crore, and consolidated revenue came in at Rs 22,205 crore, down 4.4 percent on-year. However, analysts at Motilal Oswal view Wipro’s Q3 performance as positive given that the company struggled to deliver on expectations over the last few quarters due to macro headwinds.
For the fourth quarter running, Wipro has recorded lower earnings year over year. Analysts anticipate that Wipro will continue to underperform its competitors, mainly because of the strangely low correlation between its deal wins and top-line growth.
Wipro shares were up about 10% at Rs 511.95 on the National Stock Exchange (NSE) at 9:16 a.m.
Also read: The top 5 comparisons between Wipro shares and HCL Tech’s Q3 results that you should be aware of
On Monday, the entire Nifty IT index surged almost 2.5 percent in intraday trades, driven by the 13 percent spike in Wipro and the better-than-expected earnings of other IT peers including Infosys, TCS, and HCL Tech. The best performer was Wipro, followed by Tech Mahindra, which increased by more than 7% to ₹1,401.50, its 52-week high. HCL Tech saw a 5% increase as well, reaching a new high of ₹1,617.65.
On Monday, TCS and Infosys also reached their 52-week highs, rising by 2.5% and 3.2%, respectively.
Brokerage firm Axis Securities has maintained its “sell” recommendation on Wipro following the report, with a target price of ₹450 million, indicating a 14% decline.
“Wipro shares has performed poorly in execution even if it has achieved better outcomes and closed more deals. Nonetheless, a robust deal win-backed rebound could be seen in FY25E. We advise a SELL recommendation on the stock due to insufficient visibility,” the brokerage stated. Nonetheless, the brokerage feels that Wipro has a better financial structure and a robust transaction pipeline in the long run. In contrast to peers, it falls short in terms of execution capacity to take advantage of growth. It also mentioned that the company’s short-term growth rates are unpredictable due to supply-side constraints and growing concerns about the future of global economies.
With a target price of ₹450, HDFC Securities has a cut call on Wipro in the interim.
“Wipro (WPRO) led an enhanced trajectory for Q4 and produced in-line revenue and margin performance. Despite the Q4 flat sales guidance (-1.5% QoQ to +0.5% QoQ), the company’s trajectory is “recovering” following a three-quarter decline in the quarterly revenue rate of 6%. Despite improved commentary on consulting business (bookings improvement in Capco), WPRO’s growth markers remain stressed such as (1) deal market-share loss to peers, (2) broad-based decline within verticals, and (3) steep decline in T5 accounts + risks of spend rationalization by large client,” stated the brokerage.
See Also | Wipro ADRs rise 18% to almost a 20-month high after Q3 numbers
Wipro ADR (American Depositary Receipt) is a financial instrument representing shares of Wipro Limited, an Indian multinational corporation that provides information technology services, consulting, and business process services. ADRs are traded on U.S. stock exchanges and allow investors in the United States to buy and sell shares of Wipro without directly trading on Indian stock exchanges. Each Wipro ADR typically represents a certain number of underlying shares of Wipro Limited.
The brokerage anticipates Wipro’s FY24 revenue growth rate to be among the lowest among its peers in Tier-1 IT Services, with margin below the management’s medium-term projected range of 17.0-17.5 percent, given the company’s dismal 3Q FY24 revenue growth and muted 4Q projection.
It kept its “Neutral” rating on the shares while analysts awaited more proof that the company’s new strategy was being implemented and that it had recovered well from the previous ten years of difficulties before becoming more positive on the shares. The firm assigned a target price of Rs 520 in Wipro shares based on 19x FY26E EPS.
IDBI Capital has changed its target multiple from 17x to 20x, which will result in a target price of Rs 535 (from Rs 390 earlier), and has improved its rating on Wipro from “Hold” to “Buy.” “Wipro’s ability to win large deals (14 deals worth US$0.9 bn), robust order bookings (US$3.8 bn) and client mining could be key revenue drivers in improving macros,” it stated.
Wipro has reorganized client-facing profiles and is focusing on mining strategic accounts as a growth strategy. According to Nuvama, while the client mining activities would offer revenues a boost, Wipro shares has to acquire new major clients to catch up with rivals’ growth. It would also be able to report revenue growth on par with peers’ if its large deal market share improved.
The firm maintained its ‘hold’ recommendation on the stock, citing the stock’s low valuation and strong dividend yield as limiting factors for potential downside. The target price of Rs 460 was stated.
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