Wipro, IndusInd Bank shares: What should investors do with these stocks post June earnings?

Shares of Wipro fell nearly two and half per cent and IndusInd Bank stock surged 7% in intraday trade on Thursday, a day after the two companies came out with their results for the quarter ended June 2022.  

Apparently, in the April-June quarter, Wipro failed to impress with the lower-than-expected numbers, while IndusInd reported robust Q1 earnings.  

The IT major on Wednesday reported 20.9 per cent decline in net profit at Rs 2,563 crore, while the private sector lender reported a 60 per cent rise in its first quarter consolidated net profit to Rs 1,631 crore on lower provisioning for bad assets 

After Wipro and IndusInd declared the results for Q1FY23, brokerage houses are mostly bullish on IndusInd Bank, while, maintain bearish stance on the private stock.  

Brokerages on Wipro 

CITI downgraded the IT stock to sell from buy. The global brokerage also resorted to massive target cut by reducing TP from Rs 505 to Rs 385 after Q1 result.  

"Disappointing Q1 will lead to EPS cuts. This will raise questions around ability to manage growth & profitability together. Utilization will likely improve but wage hikes are yet to come," the brokerage said in a note.   

JP Morgan maintained an underweight rating and slashed target price to Rs 340 from 370   

Goldman Sachs to reiterated a 'Sell' for target price of Rs 374, previously Rs 392.  

It was of the view that Q1 was below on wide margin miss. It recommends selling as street is yet to bake in lower margin. "Largely maintain weak revenue growth outlook over FY22-25 e. Forecast EBIT margin of 16% & reduce FY23-26 e EPS estimate by 3-5%," it said. 

Pointing out a miss on weak operating margin, Credit Suisse maintained a neutral stance with a target cut to Rs 415 from Rs 530.  

Brokerages on IndusInd Bank 

CITI maintained a buy rating on the bank stock with a target price of Rs 1150. The brokerage's bullishness was largely due to Healthy growth in Q1FY23. "Slippages were from restructured loans. Loan growth reamined healthy (18% yoy / 3.7% qoq) despite external disruptions," said the brokerage.    

It, however, feels the extent of slippages from restructured loans will be a key area to watch out for.  

Brokerage house Morgan Stanley remained most bullish of all with a target price of Rs 1300. It maintained an overweight rating on the counter.  

As per the brokerage key positive in IndusInd Bank Q1 FY23 results were strong core PPoP & steady margins despite higher rates.  Higher than expected slippages from restructured loans remained the major area of concern, as per the brokerage.  

Jefferies highlighted that profit rose 64% YoY with stronger fees and lower credit cost. " Loan growth improved to 18% YoY and NIMs rose as well. Slippages were expectedly higher, but should moderate. Turnaround is in play and improving ROA/growth to aid rerating," pointed out Jefferies while maintain a 'Buy' for a target price of Rs 1250.  

Domestic brokerage house Motilal Oswal was of the view that the bank's operating performance remained on track, led by healthy NII growth and controlled provisions. "Asset quality ratios increased marginally on higher slippages from restructured assets though credit cost outlook remains in control. The management is guiding for continued loan growth momentum driven by steady trends across both consumer and corporate businesses," it said.  

It maintained a 'buy' on IndusInd Bank for target price of 1300, which is an upside of 48% on Wednesday's closing.  

As for Wipro, Motilal Oswal has a neutral rating. It says though Wipro had a strong 1QFY23, with strong bookings and pipeline, it expects its FY23 organic growth to be one of the lowest in Tier I IT Services, along with a margin below the medium-term guided range of 17-17.5%. 

"Moreover, its capital allocation has started suffering due to elevated investment in its consulting capability. This should impact its FY23 payout as well," it said, while lowering FY23/FY24 EPS by 7%/6% to factor in the margin miss.