Wipro Ltd.’s stock recovered from its biggest single-day losing since October of last year as analysts raised price targets on the software services provider.
The company’s revenue rose 3.7% over the previous quarter to Rs 15,670 crore in the quarter ended December, aided by a ramp-up in spending on technology as uncertainties stemming from the Covid-19 pandemic waned. Dollar revenue rose to $2,071 million from $1,992.4 million.
Its net profit rose 20.3% sequentially, while EBIT margin hit a 22-quarter high. Wipro now expects revenue from IT services to grow 1.5-3.5% in the quarter ending March 2021.
Shares of Wipro rose as much as 10% after dropping 6.3% in early trade. The stock, however, pared most of its gain, trading 0.3% higher at Rs 460 apiece as of 2:15 p.m. Of the 48 analysts tracking the company, 16 have a ‘buy’ rating, 17 suggest a ‘hold’ and the remaining 15 recommend a ‘sell’. The stock trades 8.4% higher than its Bloomberg consensus 12-month price target of Rs 405.5 apiece.
Wipro's peers, HCL Technologies Ltd., Infosys Ltd. and Tech Mahindra Ltd. fell between 2% and 5% in early trades.
Here’s what analysts have to say:
HSBC
- Maintains ‘hold’ rating; raises price target to Rs 455 apiece from Rs 415.
- Margin expansion was particularly creditworthy.
- Strong demand environment is a tailwind along with renewed aggression from the new CEO.
- Don’t expect strong growth recovery.
- Stock price appears to have already factored in a decent recovery with only a limited buffer for any delay or pauses in execution.
IIFL Securities
- Maintains ‘add’ rating; hikes price target to Rs 500 apiece from Rs 390.
- Broad-based revenue growth and strong margin execution.
- Sustained revival in growth along with stable margins can provide the next leg of re-rating.
- Raises FY21-23 EPS estimates by 8-14% on better revenue and margin.
- Posts a 30% rally in the past month, stock has limited upside.
- Now trades largely in line with peers.
Kotak Institutional Equities
- Maintains ‘add’ rating with a price target of Rs 465 apiece.
- Guidance for quarter ended March is robust.
- Raises FY22-24 EPS estimates by 5%, driven by revenue and margin upgrades.
- Does not expect convergence on growth with peers.
- Expects gap in growth of 6-7% vs peers to reduce to a moderate number.
- Has not leveraged its full potential with inefficiencies in organisation structure.
- Changes made to the organisation along with large deals will help capturing some of the low hanging fruit and reduce gap with peers.
Motilal Oswal
- Maintains ‘neutral’ rating but raises price target to Rs 450 apiece from Rs 360.
- Refreshed strategy of the new management would turn fruitful over the medium to long term.
- Current restructuring and investments will take a toll on the margins in the near term.
- Upgrades FY21, FY22 and FY23 EPS estimates by 10%, 15% and 16%, respectively, led largely by a revised revenue outlook.
- Chooses to remain on the sidelines due to fair valuations
- Awaits further evidence of execution of new strategy and successful turnaround from growth struggles.
Emkay
- Maintains ‘hold’ rating; hikes price target to Rs 420 apiece from Rs 380.
- Liked broad-based sequential revenue growth, healthy deal intake and cash conversion.
- Sustained weakness across client buckets disappointing.
- Raises FY21, FY22 and FY23 EPS estimates by 9.7%, 10.9% and 10.4%, respectively, to factor in better Q3 performance.
- Hold rating due to rich valuations and patchy performance in the past.
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