Buy Wipro; target of Rs 493: Prabhudas Lilladher
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Prabhudas Lilladher's research report on Wipro
Wipro's revenue grew at 3.4% QoQ CC (Ple: 3%, Cons: 3.2%) & 3.9% QoQ in USD terms. Revenue growth was broad based growth led by 5.6% QoQ rise in E&U, 5.2% QoQ in Consumer BU and 5.5% QoQ growth in Health BU (all in reported terms). Sharp margin beat positively surprised us, re-inforcing Wipro's strategy of profitable growth. EBIT margins came at 22 quarters high at 21.7% (+ 243 bps QoQ and + 329 bps YoY) vs our estimates of 19.0% & cons: 19.1%. We believe EBIT margins of Wipro will stay above pre-Covid levels aided by certain structural operational factors such as offshore shift, sustainably higher utilization and lower than pre-Covid level travel costs, visa costs etc. Wipro closed 12 deals with > $30Mn TCV and the TCV booked of these deals was over $1.2Bn. Wipro continues to invest in industry experts and strengthens sales team with sharp focus on wining large deals. Management indicated that they aim to deliver consistent revenue growth and margin performance. Guidance for 4Q was at 1.5%-3.5% QoQ.
We have increased our estimates by 10.5%/8.3% for FY22/23 which were led by 1) Strong deal win momentum, 2) Sustainable margin performance along with growth, 3) Strong Demand trend, 4) Strong exit rate in FY21. We value Wipro on FY-23 earnings of 21X (earlier 20x, 29%/43% discount to Infy/TCS resp.) to arrive at changed TP of INR 493 (earlier: INR434). Wipro is currently trading at 21.1X/19.6X for FY22/23E earnings of INR 21.8/23.5 respectively with EPS CAGR of ~13% for FY21-23 respectively. Maintain Buy.
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