Reduce Wipro Ltd For Target Rs. 252 By Choice Broking Ltd
Q1FY26 Revenue & PAT meets estimates, EBIT misses expectations
• Reported Revenue for Q1FY26 stood at USD 2,587Mn down 0.3% Q0Q (vs CIER est. at USD 2,560Mn). In INR terms, revenue stood at INR 221.3Bn, down 1.6% QoQ.
• EBIT for Q1FY26 came at INR 35.5Bn, down 8.5% QoQ (vs CIER est. at INR 37.4Bn). EBIT margin was down 90bps QoQ to 16.1% (vs CIER est. at 17.0%).
• PAT for Q1FY26 came at INR 33.3Bn, down 7.0% QoQ (vs CIER est. at INR 32.5Bn)
Wipro eyes H2FY26 rebound amid strong deal wins & healthy pipeline: Wipro projects Q2FY26 revenue between USD 2.56–2.61Bn, indicating -1% to +1% sequential growth in CC terms. The company expects a stronger H2FY26, supported by large recent deal wins & a healthy pipeline. In Q1FY26, Wipro secured USD 5Bn in TCV, a 25.7% QoQ increase, with large deals surging 50% QoQ to USD 2.7Bn, including 2 mega deals. Most of these wins are cost optimization, vendor consolidation, & AI-led modernization. Though discretionary spending remains muted, it has stabilized. Vertically, BFSI has shown a decline on reported basis, the demand outlook remains positive, driven by emerging AI-led opportunities. Tech. & Comm. continues to grow steadily, supported by clients accelerating their shift towards AI adoption. Healthcare maintains a strong outlook, particularly in the Americas. Conversely, Retail, Manufacturing, & Consumer sectors are experiencing headwinds due to tariffs & ongoing supply chain disruptions, leading to delays or stalling of some projects. Europe continues to show weakness. However, we expect a potential Top-line recovery, contingent on favorable macroeconomic conditions & the positive impact of Phoenix deal signed in Q4FY25. These factors could support a rebound starting in Q3FY26, positioning Wipro for growth in H2.
Range-bound EBITM outlook despite pressures on pricing & consolidation: Wipro reported a Q1FY26 IT services margin of 17.3%, aligning with its aspirational band of 17–17.5%, though it provides no formal guidance. Near-term margin pressure stems from upfront investments in large deal ramp-ups, which usually carry lower margins. To mitigate this, Wipro is leveraging operational levers like productivity gains in fixed-price projects, improvements in acquired entities, and SG&A optimization via AI & process efficiencies. Traditional levers such as utilization, fresher hiring, rotation, & pyramid optimization remain in play. We believe growth & execution of secured deals are prioritized, even if some quarters see elevated investments. Thus, we anticipate a conservative margin expansion to 17.2% by FY28E. On headcount front, Wipro’s would remain focused on acquiring right talent & teams for large deals execution. Attrition rate for the quarter stood at 15.1%.
View and Valuation: Wipro’s outlook shows signs of improvement, reflected in its Q2FY26E revenue guidance of -1% to +1%, up from -3.5% to 1.5% for Q1FY26. However, future performance heavily depends on execution & evolving macroeconomic conditions, as demand remains uncertain. Management has noted some discretionary spending pockets in BFSI & Healthcare, but most deals focus on cost optimization & vendor consolidation. Considering these factors, we have adjusted our revenue estimates downward by 0-3.5% & rolled over FY28 estimates. We maintain our REDUCE rating & Target Price of INR 252, implying P/E multiple of 19x (maintained), based on average FY27E & FY28E EPS of INR 13.3.
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
