Wipro shares gain as board fixes record date for buyback; here's what brokerages say

IT major Wipro shares gained in early trade on November 19 after the company fixed the record date for the shares buyback.

The company has fixed December 11, 2020, as the record date for the purpose of determining the entitlement and the names of equity shareholders who are eligible to participate in the buyback, as per the company filing to the exchanges.

The board of directors and shareholders of the company already approved the proposal of buyback up to 23,75,00,000 fully paid-up equity shares of the company of face value of Rs 2 each at a price of Rs 400 per equity share.

Here is what brokerages have to say about the stock:

JPMorgan

Research house JPMorgan has kept underweight rating with a target at Rs 270. The analyst day signals sensible changes under new CEO.

The plans include simplifying structure & altering go to market & geo prioritization. The execution & success in driving a change in culture key for growth acceleration, while the company intends to accelerate growth while holding margin, reported CNBC-TV18.

Macquarie

Macquarie has maintained outperform call with a price target at Rs 416. Will continue to monitor the execution of new CEO’s strategy, while smooth transition to a new operating model will be critical for success, said Macquarie.

It expects more financial details to monitor progress on strategy execution. Company does not intend to drop margin to chase revenue growth, reported CNBC-TV18.

Jefferies

Jefferies has maintained an underperform rating with a target at Rs 310. The company identified its priority verticals in which it will intensify focus on large deal wins.

It simplified operating model into 4 strategic business units which suit the current approach, while the strategy seems right, its execution will be challenging, reported CNBC-TV18.

Dolat Capital

Wipro will focus investments on GTM strategy, business solutions, Scaling Partnerships and M&A. It is also confident on accelerating growth while sustaining margins (through savings from prioritizations, outcome led pricing power, operational excellence).

The commentary indicates that company would turn much more sharper, proactive, result-oriented and narrow-focused which in our opinion is ideal but difficult to execute and thus would wait for some evidences to emerge to factor these into our view/estimates and thus maintain sell rating on the stock with target price of Rs320 (valued at 16x FY23E).

Sharekhan

The CEO stated that a leaner organization structure would reduce P&L to 4 units versus 25 units earlier, which would enable the company to take better decisions on a go-to market strategy and optimize costs.

Sharekhan believes the new CEO is taking more accelerated decision in making strategic changes across organization compared to earlier CEO, which is reasonable. Wipro would focus on mining large accounts, wining large transformational deals, hiring top talents for key roles, leveraging partnerships and strategic M&A to drive growth acceleration.

At CMP, the stock is trading at 19x/17x of its FY2022/FY2023 earnings estimates, at a significant discount to its large peers. Hence, maintain a buy rating on Wipro with an unchanged price target of Rs 450.

Motilal Oswal

The key focus of Wipro’s Analyst Day was on operational changes and steps undertaken to accelerate revenue growth. The company expects the shift to four Strategic Market Units and two Global Business Lines to help streamline operations and increase its focus outside of the US.

In the past few years, the company has underperformed Tier-I companies on growth, partly due to its high exposure to challenged verticals (e.g., Healthcare and ENU). Changes at the company level have further constrained growth. However, its recent 2QFY21 result and management outlook are encouraging.

Motilal Oswal maintains neutral rating as it awaits further evidence of execution of the company’s refreshed strategy and a successful turnaround from its growth struggles over the last decade, before turning constructive on the stock.