Tata Elxsi, Wipro hit 52-wk highs on expectation of good earnings in Q2FY21

In the past three months, Wipro outperformed the market by gaining 38 per cent against 16 per cent rise in the S&P BSE Sensex

Shares of Wipro and Tata Elxsi hit their respective 52-week highs on the BSE on Friday on the expectation of strong earnings growth in the current quarter (July-September) of financial year 2020-21 (FY21).

Wipro rallied 4 per cent to Rs 295.50, surpassing its previous high of Rs 290.65, hit on July 31, 2020. In the past three months, the stock has outperformed the market by gaining 38 per cent against 16 per cent rise in the S&P BSE Sensex.

In the April-June quarter (Q1FY21), the company’s IT services’ operating margin came at 19 per cent surprised positively though, expanding 140 basis points quarter on quarter.

“There was a lot of uncertainty at the start of the first quarter along with low revenue visibility. However, the uncertainty has now subsided and there is much more clear revenue visibility. The demand environment is improving and Wipro has a good mix of large and small deals,” analysts at Edelweiss Securities said in a note.

The brokerage firm believes that Wipro has made a genuine attempt by bringing in a veteran—Mr. Thierry Delaporte—as CEO & MD (20-plus years’ experience at Capgemini). While it firmly believes that Wipro cannot overcome revenue underperformance for a few quarters, its growth rates and earnings will accelerate led by sectoral tailwind. However, the stock was trading above brokerage target price of Rs 282 per share.

Tata Elxsi gained 3 per cent to Rs 1,299 in intra-day trade today surpassing its previous high of Rs 1,274.45, touched on Thursday. The stock of the Tata group IT software products was trading higher for the fifth straight day, and has rallied 13 per cent during this period. In comparison, the S&P BSE Sensex was up 1.2 per cent during the week.

In the past three months, the stock rallied 45 per cent after the company reported 33.9 per cent year on year jump in profit before tax (PBT) at Rs 93.95 crore for Q1FY21. The company’s growth was driven by its largest division - Embedded Product Design (EPD).

Tata Elxsi is amongst the world’s leading providers of design and technology services across industries including automotive, broadcast, communications, healthcare and transportation.