An 11% surge in Wipro’s Shares on Monday morning at domestic exchanges should come as no surprise to investors, given that Wipro Ltd.’s American Depository Receipts (ADRs) saw a 17% increase on Friday. Of the four IT majors, only Wipro has released its December quarter results, which showed signs of improvement in discretionary spending, according to analysts. But, before becoming completely optimistic about the counter, analysts want to see more.
Wipro’s Shares increased by 13.10 percent on Monday, reaching a peak of Rs 511.95 on the BSE. As a result, the IT subscription has increased by 15% in the past month. In contrast, Tata Consultancy Services Ltd. saw a rise of 2%, Infosys Ltd. of 5%, and HCL Technologies Ltd. of 7%.
JM Financial said, “Wipro’s Q3 performance suggests inflection. Revenues degrowth came towards the upper end of the guided band, a first in past four quarters. Next quarter’s guide is incrementally better after three quarters of sequentially lower bands. CAPCO, its consulting business, saw double digit booking growth. That, we believe, is a first quantitative sign of rebound in discretionary spend. CAPCO’s exposure to discretionary budget plagued Wipro’s recent performance. Now as environment turns, that could lead its rebound”.
Despite achieving greater outcomes and closing more deals, Axis Securities claimed that Wipro’s execution has lagged. But, it added, FY25 might demonstrate some recovery supported by significant deal wins. It recommended a ‘Sell’ rating on the stock due to insufficient visibility.
After a 6% decline in the quarterly revenue rate over the previous three quarters, HDFC Institutional Equities stated that Wipro’s trajectory is “recovering.” Wipro’s growth indicators, such as deal market-share loss to peers, a general decline within verticals, and a sharp decline in T5 accounts, are still under stress despite better commentary on the consulting business.
Wipro has focused on driving growth through its partner ecosystem and is addressing operational profile improvements as a result of changes in the operating structure – portfolio focus in APMEA, absorbing growth office functions within Strategic Market Units, building Delivery cadre, and increasing emphasis on training and development. Maintain REDUCE on Wipro with a target of Rs 450 based on 17 times FY26E,” the brokerage said.
Wipro’s Shares reported a 1.7% decrease in constant currency (CC) revenue for the quarter. This was near the upper end of its guidance range of minus 3.5% to minus 1.5%. Wipro’s sales decline surpassed analyst expectations of a 2-4 percent decline.
“This performance has come about despite some low-margin client rationalisation in APMEA (impact not quantified). The performance has been much better than street’s worst fears as it was expecting ‘wider and deeper’ furlough quarter. The sharp ADR performance (up 18 per cent on 12th January 2024) is likely because of positioning,” said Nirmal Bang Institutional Equities.
According to Kotak Institutional Equities, the strict cost control enabled a margin beat of 50 basis points, as well as positive management commentary.
According to Motilal Oswal, Wipro’s FY24 revenue growth rate will be among the lowest in the tier-1 IT services pack. Furthermore, Wipro’s margin is expected to be lower than the management’s medium-term guided range of 17-17.5 percent. This brokerage firm maintained its ‘Neutral’ rating on the stock, waiting for more evidence of Wipro’s refreshed strategy’s execution and a successful turnaround from its struggles over the last decade before becoming more constructive on the stock. Motilal Oswal has set a Rs 520 price target on the stock.
