Hold Wipro Ltd For Target Rs. 575 - ICICI Direct
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Muted Q1FY23 revenue guidance…
About the stock: Wipro is an IT, consulting & BPO player catering to BFSI, health, consumer, energy & utility, technology and communication.
With over 230000 employees, it serves clients across six continents
Consistent payout (~70%), healthy OCF to EBITDA ratio of ~89%
Q4FY22 Results: Wipro reported weak Q4 numbers
Revenue growth of 3.1% QoQ in CC terms, 2.9%QoQ in dollar term
EBIT margins were down 60 bps QoQ to 17%
It closed 37 large deals, TCV of US$2.3 billion (bn) in FY22
What should investors do? Wipro’s share price has grown by ~2.8x over the past five years (from ~| 181 in April 2017 to ~| 509 levels in April 2022).
We revise our rating on the stock from BUY to HOLD
Target Price and Valuation: We value Wipro at | 575 i.e. 21x P/E on FY24E EPS
The strategy of the new CEO to drive a turnaround in the company
Restructuring of organisation, client mining, aspiration to win one large deal every quarter to drive growth
Higher penetration in Europe, client mining, acquisition of new logos and traction digital revenues to further boost revenue growth
Alternate Stock Idea: Besides Wipro, in our IT coverage we also like TCS.
Strong organic growth, consistent financials, industry leading margins and healthy capital allocation policy prompt us to be positive on the stock
HOLD with a target price of | 4,120
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