 "Wipro")
Wipro reported a net profit of Rs 2,870 crore for the first quarter ended June 2023 (Q1-FY24), up nearly 12 per cent from a year ago but down 6.6 per cent quarter-on-quarter (QoQ). Revenues for period under review came in 6 per cent higher YoY at Rs 22,831 crore, though were a tad below the consensus Bloomberg estimates of Rs 22,992 crore.
On Friday, the stock traded flat at the bourses, in line with the benchmarks, rising a modest 0.2 per cent to Rs 395 levels. The S&P BSE Sensex, too, traded 0.2 per cent higher at 65,709 levels at 10.30am.
Here's how leading brokerages have decoded Wipro's Q1-FY24 results.
Nomura
Wipro has guided for the revenue growth to range from -2 per cent to +1 per cent q-q in cc terms for 2QFY24F, marginally better than our estimate of -2 per cent to 0 per cent. This guidance includes ISRE business which has been merged with IT services. We think the weak guidance reflects demand headwinds, particularly in discretionary business like consulting. For FY24F, we expect -0.8 per cent y-y growth in USD revenues.
We lower FY24F EPS by 1.5 per cent and raise FY25F EPS by ~0.5 per cent. Our FY24-25F EPS are ~9 per cent lower than the Street. We raise the target price from Rs 370 to Rs 375, set at an unchanged 16x FY25F EPS. We retain Neutral rating. Downside risk: weaker-than-expected revenue growth. Upside risk: better margin.
JM Financial
More From This Section
A weak discretionary spending environment is impacting WPRO’s near-term growth and outlook - probably a little more than peers - masking the impact of on-going structural changes on the headline numbers. A muted 2Q guidance (-2 per cent to +1 per cent) indicates that the stress is not relenting yet.
To its credit, Wipro's seemingly conservative quarter beginning guidance has turned out to be a reliable gauge of next quarter’s performance for its large-cap peer set. That would mean we are probably looking at another quarter of muted growth ahead. We, therefore, don’t share the market optimism around sector’s bounce back just yet. That said, Wipro remains our only large-cap BUY on low expectations + undemanding valuations + positive structural changes. We have marginally tweaked our EPS estimates. PAT estimates are however lower by 3-5 per cent on higher dilutive share count (effect of buyback).
Kotak Institutional Equities
A weak discretionary spending environment is leading to leakage of revenues and offset benefit of large deal wins. The company has done well to defend EBIT margin. Revenue guidance band of (-)2 to +1 per cent is a tad lower than our estimate. A vulnerable discretionary heavy portfolio and select cases of loss of wallet share amid a turnaround journey make Wipro vulnerable. We cut FY2024-26 revenue estimates by 2-5 per cent. EPS estimates are unchanged as we account for buyback and change in INR/USD assumptions. Maintain REDUCE rating.
Axis Securities
From a long-term perspective, we believe Wipro has a strong deal pipeline and superior financial structure. However, it lags in execution capabilities to capitalize on growth as compared to peers. Moreover, rising concerns over the prospects of large economies along with prevailing supply-side constraints pose uncertainties over the company’s short-term growth rates. We recommend a HOLD rating on the stock and assign a 15x P/E multiple to its FY25E earnings of Rs 25.9/share to arrive at a target price of Rs 400/share.
