Wipro vs TCS vs Infosys: Why Azim Premji company was best pick despite Q2 pain; should you buy?
Wipro vs TCS vs Infosys: Azim Premji led company's share price ended up being the best pick for investors, as it was top performer on BSE, and finished at Rs 319.60 per piece up by 3.38%.
IT-major Wipro saw a big setback during second quarter of FY19 (Q2FY19). It disappointed with its performance on net profit. Interestingly, this did not stop most investors in maintaining their buying sentiment. This is despite Wipro being the only IT company recording a downtrend in its earnings, whereas, its rivals Infosys and TCS outshined during Q2FY19 by recording positive growth. So far, Wipro stock soared by 5% by touching an intraday high of Rs 324.7 per piece on BSE. But the company's share price also ended up being the best pick of investors, as it was top performer on BSE, and finished at Rs 319.60 per piece up by Rs 10.45 or 3.38%.
Wipro registered net profit of Rs 1,889 crore which was down by 13.81% from Rs 2,191.8 crore in the corresponding period of the previous year. Q2FY19 net profit was also down by 10.92% as against Rs 2,120.8 crore in the preceding quarter.
Meanwhile, TCS, which was the first to announce its Q2FY19 result, recorded 22.6% yoy jump in consolidated net profit at Rs 7,901 crore in net profit and Infosys' consolidated net profit of Rs 4,110 crore was up by 10.30% on yearly basis.
Amazingly, after TCS announced its result, the company's stock was among top losers, and even Infosys did not turn out to be a best pick of investors when results were declared. So, it is very interesting that Wipro has posted a decline in net profit, and yet it has still managed to be the best pick on markets.
Ravi Menon and Ashish Agrawal analysts at Elara Capital said, " Wipro (WPRO IN) reported revenue growth of 1.6% QoQ in constant currency (CC) terms, ahead of our expectations of 0.7% helped by 1m of integration of the USD1.5bn 10-year deal with Alight. Adjusting for the divesture of the data center business, QoQ growth in CC terms was 2.8%, the best since 2QFY16."
The duo explained: "While we had expected improved execution over 2HFY19, we are positively surprised at the broad-based nature of growth and even earlier than anticipated. BFSI posted its tenth consecutive quarter of growth at 3.4% QoQ and 16.0% YoY in CC terms (vs QoQ growth of 5.8 for Infosys and 3.5% for TCS) makingfor an impressive CQGR of 2.7% in USD terms from 4QY16."
They admitted such a quick and drastic improvement in margin (80bp QoQ adjusted for one-offs) was not expected in a quarter where Wipro had to bear the impact of 2 additional months of a wage hike given in June 2018. However, we think there is still headroom for further improvement.
Finally the analysts at Elara reiterated Buy target on Wipro, by saying, "our top pick in the sector with estimates that continue to be significantly ahead of consensus."
Elara added, "We adjust estimates for new USD-INR average of 71.2 for FY19, 74.3 for FY20 and 76.2 for FY21. We increase INR revenue by 4.5%, 7.4% and 7.6% for FY19E, FY20E and FY21E. We hike EBITDA margin by 34bp, 87bp and 6bp for FY19E, FY20E and FY21E, respectively."
Considering the above Elara lastly said, "We continue to expect a rerating as parts of the portfolio are matching peers already in sequential growth and expect further improvement over 2HFY19. We arrive at a new TP of INR405 from INR395 on 16x (earlier 17x) FY20 P/E."
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Retirement Planning: SIP+SWP combination; Rs 15,000 monthly SIP for 25 years and then Rs 1,52,000 monthly income for 30 years
Retirement Calculator: 40 years of age, Rs 50,000 monthly expenses; what should be retirement corpus and monthly investment
SBI 444-day FD vs Union Bank of India 333-day FD: Know maturity amount on Rs 4 lakh and Rs 8 lakh investments for general and senior citizens
EPF vs SIP vs PPF Calculator: Rs 12,000 monthly investment for 30 years; which can create highest retirement corpus
Home loan EMI vs Mutual Fund SIP Calculator: Rs 70 lakh home loan EMI for 20 years or SIP equal to EMI for 10 years; which can be easier route to buy home; know maths
04:53 PM IST