Credit Source
Shares of Wipro hit 10-month high of Rs 420.10, gaining 4 per cent on the BSE in Monday’s intra-day trade. In the past two trading days, the stock of the information technology (IT) services company has surged 7 per cent after the company posted a net profit of Rs 2,870 crore in the first quarter ended June (Q1FY24), up nearly 12 per cent from a year ago but down 6.6 per cent quarter-on-quarter (QoQ).
Wipro was trading at its highest level since September 15, 2022. It had hit a 52-week high of Rs 444.65 on August 17, 2022.
The company’s IT services revenue was down 2.1 per cent quarter-on-quarter (QoQ) (down 2.8 per cent QoQ in constant currency terms) to $2,778.5 million. The earnings before interest and tax (Ebit) margins came in at 16 per cent, and was down 20 bps QoQ, given the negative operating leverage but partially offset by higher utilisations.
For Q2FY24, Wipro has guided for a revenue growth of -2 per cent to 1 per cent in constant currency (CC) terms and similar margins band. The company sounded off on near-term demand challenges due to reduction in discretionary spends including in key segments, albeit reiterated long term tailwinds from generative AI, ICICI Securities said in a note.
In the short term, the whole IT pack may continue to feel pressure due to softness in demand and ongoing macro challenges. In the case of Wipro, long term trend is expected to improve as demand is set to get back on track as well as investment in Automation and Gen AI based products & solutions will aid growth, analyst at Religare Broking said.
“However, in the short term, it is still struggling for a stable revenue growth trend. The management, too, remains cautious and has projected soft revenue for Q2FY24 as clients discretionary spending is likely to be delayed. So, these concerns are still hovering around, and thus we maintain a Hold rating with a target price of Rs 432,” the brokerage firm said in a result update.
While there aren’t any near-term catalysts, improved payout following an acquisitive strategy in the prior two years and valuations at 16x FY25E limit the downside risk, according to analysts at HDFC Securities. The stock, however, is trading above brokerage target price of Rs 410 per share.
Wipro posted a broad-based revenue decline in Q1 and the Q2 guidance also points to growth challenges. Wipro’s growth underperformance to peers is due to the higher mix of consulting services (Capco, Rizing) and steeper impact from discretionary projects in BFSI and Telecom verticals, the brokerage firm said.
“While the bookings remain robust, the conversion/cancellation impact is also larger, reflecting a combination of portfolio and execution challenges (Wipro growth trailing TCS despite the last three quarters’ book-to-bill being higher at 1.45x as compared to 1.3x for TCS). The company’s seasonally strong H2 supplemented by Q1 large deal bookings of $1.1 billion can put Wirpo back to sequential growth but with a quarter’s lag as compared to peers,” analyst said.
Wipro was trading at its highest level since September 15, 2022. It had hit a 52-week high of Rs 444.65 on August 17, 2022.
The company’s IT services revenue was down 2.1 per cent quarter-on-quarter (QoQ) (down 2.8 per cent QoQ in constant currency terms) to $2,778.5 million. The earnings before interest and tax (Ebit) margins came in at 16 per cent, and was down 20 bps QoQ, given the negative operating leverage but partially offset by higher utilisations.
For Q2FY24, Wipro has guided for a revenue growth of -2 per cent to 1 per cent in constant currency (CC) terms and similar margins band. The company sounded off on near-term demand challenges due to reduction in discretionary spends including in key segments, albeit reiterated long term tailwinds from generative AI, ICICI Securities said in a note.
In the short term, the whole IT pack may continue to feel pressure due to softness in demand and ongoing macro challenges. In the case of Wipro, long term trend is expected to improve as demand is set to get back on track as well as investment in Automation and Gen AI based products & solutions will aid growth, analyst at Religare Broking said.
“However, in the short term, it is still struggling for a stable revenue growth trend. The management, too, remains cautious and has projected soft revenue for Q2FY24 as clients discretionary spending is likely to be delayed. So, these concerns are still hovering around, and thus we maintain a Hold rating with a target price of Rs 432,” the brokerage firm said in a result update.
While there aren’t any near-term catalysts, improved payout following an acquisitive strategy in the prior two years and valuations at 16x FY25E limit the downside risk, according to analysts at HDFC Securities. The stock, however, is trading above brokerage target price of Rs 410 per share.
Wipro posted a broad-based revenue decline in Q1 and the Q2 guidance also points to growth challenges. Wipro’s growth underperformance to peers is due to the higher mix of consulting services (Capco, Rizing) and steeper impact from discretionary projects in BFSI and Telecom verticals, the brokerage firm said.
“While the bookings remain robust, the conversion/cancellation impact is also larger, reflecting a combination of portfolio and execution challenges (Wipro growth trailing TCS despite the last three quarters’ book-to-bill being higher at 1.45x as compared to 1.3x for TCS). The company’s seasonally strong H2 supplemented by Q1 large deal bookings of $1.1 billion can put Wirpo back to sequential growth but with a quarter’s lag as compared to peers,” analyst said.
Add A Comment