Wipro Q4 adds to profit, but growth lags Infosys, TCS; Should you buy this Azim Premji led company's stock?

When the markets open on Thursday’s trading session, one can expect Azim Premji led IT service provider Wipro to remain in focus. On Wednesday, stock exchanges were shut due to Mahavir Jayanti festival. In previous trading session, investors were cautiously trading in Wipro, as the company was set to announce its Q4FY19 result. Wipro presented its last quarter and fiscal year performance for FY19 on Tuesday, where it bagged consolidated net profit of Rs 2,484 crore in Q4F1Y9, higher by 37.74% compared to profit of Rs 1,808 crore a year ago same period. But, Q4FY19 PAT plunged by 1.07% as against Rs 2,510.4 crore in Q3FY19. Revenue also saw jump, however at single-digit by 8.98% yoy to Rs 15,006.3 crore. Apart from this, the company also announced a buyback of Rs 10,500 crore in which promoters of the group will also participate. Hence, as a investor whether Wipro shares are worth adding in your portfolio or not, needs some analysis. 

Sandip Agarwal and Pranav Kshatriya analysts at Edelweiss Securities said, “Wipro’s Q4FY19 IT services’ revenue, at USD2075.5mn, rose 1.4% QoQ (1.0% in constant currency (cc)), below Street’s 2.0% growth estimate. Adjusted operating margin declined 70bps QoQ to 18.2%, in line with Street’s estimate. Management guided for muted revenue growth of - 1.6% and 0.4% for Q1FY20 even considering seasonality. Digital business reported strong 6.4% QoQ and 32% YoY revenue spurt and contributed 35% to overall revenue.”

However, even though Wipro did add some profit in its balance during Q4FY19, according to Edelweiss it still remain way below peers Infosys and TCS. 

The duo said, “We await sustained revenue momentum and more broad-based growth before revisiting our 16x target multiple. We believe, Wipro will continue to grow below industry, justifying current valuation of 17.3x FY20E EPS.”

Analysts further added, “Amidst strong demand, Wipro’s key verticals BFSI and consumer are clocking good growth. However, gloomy Q1FY20 revenue outlook and sustained slow down in Europe and RoW geographies mandate the lower-than-peers target multiple of 16x Q1FY21E EPS. Announcement of share buyback worth Rs105bn should support the stock at current price levels. We retain ‘HOLD/SP’ with TP of Rs261.”

Wipro expects Revenue from our IT Services business to be in the range of $2,046 million to $2,087 million. The company said, "This translates to a sequential growth of -1.0% to 1.0% excluding the impact of the divestment of our Workday and Cornerstone On Demand business which was concluded in the quarter ended March 31, 2019.”