Wipro share price: CLSA lifts target price to Rs 370, Macquarie hikes it to Rs 416

Wipro's CC (constant currency) revenue grew 2% QoQ, while EBIT margin for IT services expanded 14 bps QoQ to 19.2%; cash conversion remained strong. Wipro provided better than expected growth guidance of 1.5-3.5% QoQ for Q3 FY21; management expects growth momentum in BFSI to continue, while energy and  utilities and technology verticals would recover in Q3. Although new CEO has a challenging task to get Wipro back to industry-level growth trajectory.

CLSA maintains underperform rating on Wipro but lifts target to Rs 370 from Rs 320

CLSA says recovery appears more a consequence of macro demand drivers and hence should be looked on a relative basis than absolute. New CEO has identified the priorities well but the impact will be visible only in the medium term. CLSA believes Wipro needs to highlight more quantitative markers such as size of the order book and new deals to improve investor confidence in longer term outlook.

Citi downgrades Wipro to neutral from buy with a target price of Rs 400

Wipro delivered good Q2 with revenues slightly ahead of expectations and margins inline. They believe focus will now shift to the initiatives and execution under the new CEO. Margins performance continues to remain strong due to well managed costs over the past few quarters. Citi highlights incremental margin levers appear limited going forward. Cloud and Infrastructure services businesses have seen flattish growth QoQ.

BofA Securities says Wipro had a Steady Q2, first impression of strategy unveil are constructive

BofA raised the price target on Wipro to Rs 370 from Rs 312. They think new CEOs transformation plan appeal to be positive, pace of execution of the strategies remains to be watched going further.
Key plans of the strategy appear to be:
1) Improve turnaround time for the front end teams and its tighter integration with delivery.
2) Lowered span of control to increase bandwidth with customers.
3) Honing investments in targeted industry verticals and geographies.
Growth was strong in key industrial segments of financial services, retail and manufacturing. Promotions and wage hikes to kick in from December which will impact margins going forward.

Macquarie maintains outperform rating raises target to Rs 416 from Rs 310

The new CEO’s strategy will focus more on profitable growth. More clarity on this aspect will happen in November.
5 point strategies highlighted by new CEO are below:
1) Focus on growth with higher focus on existing clients and large deals.
2) Sharper focus on priority verticals and markets.
3) Increasing depth of offering beyond I.T. services.
4) Nurturing talent, especially in a fast growing digital area.
5) Simplification of its operating model by creating a leaner and more client focussed organisation.

Macquarie believes if planned strategies are executed well, it can bring back Wipro’s organic growth rate to the industry level in medium term. Sales transformation will be the key factor to monitor going forward. Wipro is well positioned to benefit from the 3 ‘C’s (cloud transformation, customer experience and core transformation) as these would drive higher demand for I.T. services in medium term.

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UBS says Q2 FY21 for Wipro in line with expectations, guidance is much better than expected

UBS maintains a sell rating on Wipro with a target of Rs 210. They expect muted reactions to results, strategy to revenue acceleration remain a key to watch going forward.

(Authored by Rahul Kamdar)