Wipro logs in nearly 3% profit growth in Q3: What should you do with the stock now?

Wipro has posted consolidated revenue from operations at Rs 23,229 crore, up 14.35 percent against Rs 20,313.6 crore, YoY.

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Wipro shares will remain in focus on January 16 after the company reported better numbers for the third quarter ended December 2022.

The IT major on January 13 reported a 2.82 percent growth in its consolidated net profit for the quarter ended December 2022 (Q3FY23) at Rs 3,052.9 crore as against Rs 2,969 crore recorded a year ago.

Wipro‘s consolidated revenue from operations stood at Rs 23,229 crore, up 14.35 percent against Rs 20,313.6 crore in the corresponding quarter last year, Wipro said in an exchange filing.

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Here is what brokerages have to say about the stock and the company after the December quarter earnings:

Asian Markets Securities

The research house expects Wipro to post 7.6 percent and 7 percent growth in FY23 and FY24.

It expects 420 bps currency headwinds in FY23 implying a growth of 11.8 percent (at the mid-point of management’s guidance of 11.5-12 percent growth) and organic growth of 7.5 percent. At 7.5 percent organic growth, Wipro will once again trail its peers on growth rates by a significant range.

The broking firm expects IT services margins of 15.7 percent in FY23, improving to 16.5 percent in FY24. Its FY23 EPS remains largely the same while FY24 EPS sees a cut of 2 percent to Rs 24.1

Inexpensive valuations and high dividend yield limit the downside potential of the stock. Maintain Accumulate.

Nirmal Bang

The company maintained the ‘sell’ rating with a target price of Rs 347 for the share.

Wipro believes that 16.3 percent will be the new base of EBIT margin. But with pricing being a challenge due to both macro conditions as well as higher number of cost takeout deals, brokerage house believe it will be tough to achieve its aspirational target of 17.5 percent EBIT margin in the foreseeable future.

Investments in the large deal team are paying off, as large deal bookings have been reported at $2.85 billion for 9MFY23, up 50 percent on a YTD basis.

After Q3FY23, the broking house raised its margin estimates by 100bps across FY24-26, leading to an increase in EPS estimates by 4-5 percent.

Nirbal Bang largely maintained its below-consensus USD revenue estimates for FY24-FY26.

CLSA

The research house has kept the ‘outperform’ rating on the stock with a target at Rs 450 per share.

The Q3 revenue growth was below estimates, while revemnue growth guidance indicates weakness may persistent in near term.

The order booking was strong and management commentary was upbeat on the medium-term outlook.

The company’s margin recovered strongly in Q3FY23 and with input costs easing, remain hopeful of expansion in FY24, reported CNBC-TV18.

Nomura

The brokerage firm has maintained the ‘neutral’ rating on the stock with a target at Rs 425 per share.

According to Nomura, the growth hurt by furloughs & lower discretionary spends.

The increasing deal tenures leading to delay in translation to immediate growth, while margin recovery was strong.

The total bookings TCV were at all-time high with healthy pipeline; shows optimism for CY23, reported CNBC-TV18.

Jefferies

Broking firm Jefferies has kept the ‘underperform’ rating on the stock with a target at Rs 355 per share.

The Q3 was beat estimates due to a sharp rise in margin.

The broking house has lowered the revenue estimates by 1-2 percent but raise EPS estimates by 2-4 percent and expect company to deliver 11 percent EPS CAGR over FY23-25.

The slower than expected growth should drive further de-rating, reported CNBC-TV18.

Kotak Institutional Equities

The brokerage house has maintained the ‘reduce’ rating on the stock with a target at Rs 425 per share.

The company has reported a mixed set of numbers. It was another quarter of strong deal wins failed to translate into improved revenue growth.

The material improvement in profitability drives a 2-5% rise in EPS estimates over FY23-25, reported CNBC-TV18.

Investec

Research firm has upgraded the stock to hold and also raised the target price to Rs 405 per share.

The reported revenue was below our estimates, said Investec.

The weakness in growth was driven by furloughs & cuts in discretionary spends, while management pointed out weakness was driven by longer tenures.

The margin was better than expectations, led by non-recurrence of restructuring costs.

The research firm believes that growth in FY24e is likely lower than FY23e, reported CNBC-TV18.

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