Prabhudas Lilladher recommended hold rating on Wipro with a target price of Rs 247 in its research report dated April 17, 2019.
Prabhudas Lilladher's research report on Wipro
Wipro's guidance indicates a weak start to FY20E; revenue growth guidance for Q1FY20E (-1%-+1%) is much lower than our expectations of 0.5-2.5%. Guidance was softer than expected due to delay in ramp-ups. Wipro's key vertical posted a flat to negative growth in this quarter (BFSI 1.3% QoQ CC, Energy -0.7% QoQ CC, Manufacturing 0.7% QoQ CC). Inconsistency & volatility of revenue growth among its key vertical makes us cautions. We believe companies will have to invest in digital & people to participate in the strong demand environment. Wipro's management aggressive cost rationalization keeps us skeptical about their participation in demand environment & hence will restrict revenue momentum. In our view, re-rating requires more consistent delivery on revenue growth & margins.
Outlook
We expect 5.5% & 8.8% USD revenue & EPS CAGR for FY19E-FY21E respectively & value Wipro at 14.5x Mar-21 earnings to arrive at an unchanged target price of Rs.247. Capital allocation strategy restricts downside risk in near term. Maintain Hold.
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