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Analyst Corner: Wipro: Maintain ‘buy’ with unchanged TP of Rs 550 – The Financial Express

Operating margin at 21% again outperformed expectations despite the company handing out wage hikes to 80% of its employees in January 2021.By Edelweiss SecuritiesWipro delivered another quarter of strong results. IT services revenue grew 3% QoQ (in cc), in line with both our (3.1%) and Street’s (3%) estimates. Operating margin continued to surprise for IT services at 21% (down 70bps QoQ), well ahead of our and Street’s estimates of 19.6% and 20.4% respectively. Management has guided for sequential growth of 2–4% for Q1FY22, largely in line with estimates. TCV of the order book remains strong and grew 33% YoY for H2FY21, the highest TCV ever reported. The pipeline remains healthy too. All in all, we remain optimistic about the demand environment. Maintain ‘BUY’ with an unchanged TP of `550 as we roll over the valuation to Q2FY23E.Related NewsAfter muted growth over the last few years, Wipro has delivered strong results for a third quarter in a row led by a healthy volume growth. After a steep decline in Q1FY21, the company bounced back sharply. And now it has ended FY21 with only a small reported decline of 1.4%. By vertical, health, manufacturing and communications clocked a decline on a sequential basis while technology and consumer segments saw the strongest growth of 9.9% YoY and 6.9% YoY, respectively, in Q4FY21. BFSI saw robust growth of 2.7% QoQ (in cc). By geography, only Asia Pacific Middle East Africa (APMEA) posted a decline on a sequential basis.Stability across the board. Operating margin at 21% again outperformed expectations despite the company handing out wage hikes to 80% of its employees in January 2021. Wipro plans to give skill-based bonuses and promotions to retain its talent. Operating metrics have shown a consistent improvement with gross utilsation further increasing to 76.7% and offshoring to 54.5%. Attrition rose to 12.1% in Q4FY21 from 11% in Q3FY21. The firm won 12 large deals, resulting in a TCV of $1.4bn. The firm also added more than 18,000 employees in this quarter, including more than 2,850 freshers. Outlook and valuation. On a firm footing; maintain ‘BUY’ Wipro’s turnaround has been led by the strategy of the new CEO, coupled with a strong demand environment. Along with these, improved execution is likely to drive earnings going ahead. Maintain ‘BUY/SN’ with an unchanged TP to Rs 550 (25x Q2FY23E) as we roll forward the valuation to Q2FY23E.Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.