Wipro reported a heathy set of Q3FY21 numbers that were above our estimates on all fronts. Revenue growth took place across verticals. The IT service EBIT margin increased 234 bps QoQ to 21.7% vs. our estimate of 19.5%, mainly led by higher offshoring. Key highlights of the quarter was 1) the company has won 12 deals with > US$30 million (mn) TCV and TCV booked of these deals was over US$1.2 billion (bn), 2) Wipro has declared dividend of Rs. 1/share, 3) Its offshore percentage increased 230 bps to 52.7%. Wipro guided that its Q4FY21E IT services revenues would be in the range of US$2,102-2,143 mn, which translates to 1.5-3.5% QoQ growth.
Valuation & Outlook
The company is seeing double digit growth in the US order book and higher demand from Europe. In addition, Wipro's focus on winning one large deal each quarter, client mining, acquisition of new logos and traction in digital revenues bodes well for revenue growth. Further, we expect improving growth along with cost rationalisation to keep margins buoyant. However, the recent run up in the stock price factors in most of the positives. Hence, we maintain our HOLD rating on stock price with a revised target price of Rs. 490 (20x PE on FY23E EPS) (earlier target price of Rs. 435).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Wipro_Q3FY21.pdf
Shares of WIPRO LTD. was last trading in BSE at Rs.454.45 as compared to the previous close of Rs. 458.75. The total number of shares traded during the day was 2500741 in over 30717 trades.
The stock hit an intraday high of Rs. 466 and intraday low of 431. The net turnover during the day was Rs. 1129142136.