BRICS PCG in its morning call recommends Wipro at current market price of Rs 436 with a target price of Rs 555.Wipro has announced an agreement to acquire Saraware, a Finland-based telecom software design and engineering service provider.The acquisition will be done in an all-cash deal valued at �25mn, involving upfront cash payment and debt takeover, along with earn-outs on achieved targeted financial performance over a period of 18 months.This is Wipro's second acquisition in Europe this month, following its takeover of Enabler, a retail solution provider. The acquisition would give Wipro a near-shore development centre in Finland to acquire and cater to new clients in the Nordic region - home to many wireless infrastructure majors who collectively control close to 50% of the global market share in this domain.Following the current acquisition of Saraware for �25mn, the company is valued at 1.8x and 9.3x on FY05 revenue and EBTIDA respectively.At the current price of Rs 436, Wipro is trading at 23.8x and 19.3x on FY07E and FY08E EPS of Rs 18.3 and Rs 22.7 respectively.The scrip has corrected significantly during the current market downtrend, and current valuations are very much in line with industry peers.Our target price of Rs 555 is at 24.5x one-year forward P/E which is a discount to our target P/E of 25x for Infosys.
