Should you invest in Wipro post-Q1 results?

• Follow

Analysts retained their bullish views on Wipro after it posted a 35.65% year-on-year growth in consolidated net profit at Rs 3,242.60 crore for the quarter ended June 30. It had posted a profit of Rs 2,390.40 crore in the same period last year. The figure increased by 9.09% on a quarter-on-quarter basis. However, shares of the company traded 0.11% down at Rs 575 at around 1.05 pm (IST). On the other hand, the BSE Sensex was down 0.09% at 53,111 at around the same time. Consolidated income from operations increased by 22.39% YoY and 12.35% QoQ to Rs 18,252.40 crore.

Should you buy?

Brokerage YES Securities maintained an ‘Add’ call on Wipro with a price target of Rs 625, indicating an upside of 8.69% from the current market price. “The revenue growth was slightly above expectation due to robust organic growth as well as the contribution from Capco acquisition. However, the margins have come under pressure due to wage hikes and higher attrition. While some of the margin pressure would be managed through improved employee pyramid and other productivity measures, but the risks to margin remain,” it said adding that organic revenue growth for FY22 would be in double-digit led by robust deal wins.

Wipro expects revenue from the IT services business to be in the range of $2,535 million to $2,583million for the quarter ended September 30. This translates to a sequential growth of 5.0% to 7.0%.

Brokerage View

Commenting on the Q1 results, Sharekhan said Wipro reported better-than-expected constant currency (CC) revenue growth led by strong growth of 4.9% in constant currency organic revenue, which stood at a 38-quarter high. Better-than-expected incremental revenue contribution from the CAPCO acquisition ($153 million versus our estimates of ~$130 million) also aided revenue growth. It has a ‘Buy’ call on Wipro with a target price of Rs 670.

“We have revised our earnings estimates for FY2022E, FY2023E, and FY2024E on the back of strong revenue growth in Q1FY2022, robust growth in top accounts, client additions and a healthy deal pipeline, though margins could remain under pressure due to one-month consolidation of low margin business of CAPCO and wage hike for junior employees (effective September 1, 2021),” Sharekhan said in a report.