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Robust demand environment to sustain

Wipro hosted a virtual investor & analyst day 2021. Highlights: i) Companies across industries are rapidly accelerating the transformation journey. ii) Plans to hire 25-30K freshers next fiscal. iii) Annual revenue run-rate surpassed USD10bn-plus. iv) Cloud is the single biggest opportunity. Cybersecurity, Data and AI, and engineering opportunity continue to be strategic and significant.

Management noted demand continues to be very strong with market likely to stay buoyant in the near and medium term. We believe Wipro’s growth momentum would sustain for the rest of the year, which would help it surpass top-end of guidance, thereby reaffirming our conviction. Retain ‘BUY’ with a TP of INR840 (30x Q4FY23E).

Key takeaways

* Five strategic priorities: i) Accelerate growth focus and scale. ii) Strengthen clients and partnerships. iii) Lead with business solutions. iv) Build talent at scale. v) Simplified operating model.

* Wipro and Capco are trusted partner for clients in financial services. This acquisition will help provide more comprehensive solutions to clients.

* Priorities for the next 12-months: i) Continue to focus on growth and momentum and win large deals. ii) Focus on attracting and retaining best talent. iii) Accelerating growth hotspots. iv) Driving operational excellence and profitability.

* All sectors are witnessing significant demand and robust pipeline. The Travel and aerospace sectors, which were struggling seven months ago, are on track. Engineering is seeing strong demand in automotive and Energy & Utilities.

* Ways to mitigate attrition: Accelerating freshers’ intake, refreshed reward programs, technology-enabled hiring to enhance on-boarding experience, reimagined campus hiring programs and enriching careers.

Outlook and valuation: Momentum to sustain, maintain ‘BUY’

Management highlighted that Wipro’s strategy entails a multi-pronged approach focusing on acquisition, development and retention of the highest quality cybersecurity talent. It wants to be an ‘orchestrator of choice’ across businesses. The CTO mentioned that it will enhance Wipro’s position as a dominant technology player in the future. And the company is committed to be net zero by 2040 by reducing carbon footprint.

Wipro will continue with once a year salary hike from next fiscal and highlighted its flexible working model. It laid out M&A as a high strategic priority. We believe the robust demand environment along with a solid margin guidance will drive Wipro’s revenue growth for a long period. The stock is trading at 23.6x FY23E. Maintain ‘BUY/SN’ while raising the TP to INR840 (30x Q4FY23E) on strong demand outlook.

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