Shares of IT services major Wipro on Monday rallied up to 2% to the day\’s high at Rs 462 on BSE after investors noted a few bright spots in its March quarter results – positive volume growth, sustained momentum in Capco, stability in BFSI and large accounts led growth.
\”About 80% of Wipro\’s revenue decline over 2QFY23-3QFY24 has come from BFSI alone. A return to growth in BFSI should therefore help stem the erosion,\” said JM Financial\’s Abhishek Kumar.
During the quarter, Wipro\’s IT Services revenue was down 0.3% QoQ in constant currency (CC) terms to $2.66 billion in Q4, in line with consensus.
Wipro\’s operating performance has remained subdued over the past decade, despite several changes in the leadership. The new CEO Srini Pallia does not plan to revamp the organizational structure and prioritizes reviving growth in the near term. The performance of Wipro under the new CEO will be keenly monitored by investors before any meaningful re-rating, analysts say.
Also read | Wipro Q4 Results: Profit falls 8% YoY to Rs 2,835 crore, marginally misses estimates
Pallia has outlined five broad contours of his strategy – focus on large deals, deepening client and partner relationships, build industry-specific solutions using AI, readying talent at scale for AI, and simplifying operating model with more focus on operational rigour.
Both Nomura and HSBC have maintained reduced ratings on Wipro with target prices of Rs 410 and Rs 385, respectively.
\”Wipro cautioned that the revival in BFSI (+2.1% q-q) is partly due to the reversal of furloughs seen in 3Q and discretionary demand remains challenging. Despite healthy order booking, Wipro’s 1Q FY25F revenue growth guidance of -1.5% to +0.5% q-q in cc reflects our view,\” Nomura said.
Morgan Stanley reduced the target price to Rs 421 saying that although the commentary suggests stabilization in the BFSI vertical, there is limited clarity on pace of recovery.
UBS also has a sell rating with a target price of Rs 430. “Management optimism in last quarter around revival in consulting on basis of Capco order book did translate into soft growth but not enough to drive overall revenue growth. Further, a weak Q1FY25 guidance indicates revival still some time away,” it said.
Kotak Institutional Equities said it expects flat revenue in FY25.
\”The new CEO will follow a similar strategy as Thierry Delaporte, with greater emphasis on execution, which is easier said than done. The strong execution on margin improvement leads to an upgrade in margin estimates, leading to a 1-2% increase in FY2025-26E EPS. The FV
increases to Rs440 due to the EPS increase and rollover to June. The stock trades at full valuation. We expect the underperformance to continue,\” it said.
Motilal Oswal has trimmed its FY25 and FY26 EPS estimates and reiterated Neutral rating, as it views the current valuation as fair.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
