What should one do with Wipro stock after Delaporte's exit? Check top brokerages' views

Wipro share price: Wipro shares slipped as much as 1.4 per cent to Rs 478.40 apiece on the BSE on Monday, April 8, as in a crucial development during the weekend, the CEO, Thierry Delaporte, resigned.

The Bengaluru-based IT services provider, in its release dated April 6, 2024, informed exchanges that Thierry Delaporte will be replaced with immediate effect by Srini Pallia, the company’s newly appointed MD and CEO.

"Wipro Limited (NYSE: WIT, BSE: 507685, NSE: WIPRO), a leading technology services and consulting company, today announced the appointment of Srini Pallia as the Chief Executive Officer and Managing Director of the Company, effective immediately. He succeeds Thierry Delaporte, who, after spearheading a significant transformation at Wipro for the last four years, is stepping down to pursue passions outside," the company's release said.

Analysts at Nirmal Bang Securities, in their report on the management change, said that over the last 25 years, Wipro has had both internal and external candidates as CEOs and has seen greater M&A activity than other Tier-1 Indian peers. But as things stand today, Wipro Global IT Services US$ revenue (FY24E) is nearly 42 per cent lower than that of Infosys with lower EBIT margins, whereas in FY2000, Wipro Global IT Services' revenue was 15 per cent larger.

"We maintain a SELL on Wipro with a target price of Rs 441, which is based on a target PE multiple of 16.6x (30% discount to TCS) on FY26E EPS. The high discount of 30 per cent that we are assigning is due to its significantly below-peer group revenue performance in the recent quarters and its significantly lower ROIC due to its inability to squeeze out enough value from its M&A moves. We believe the new CEO needs to execute before we can think of changing our target PE multiple," the brokerage added.

Global brokerage Jefferies has also maintained an 'underperform' view and suggested a target of Rs 470. The brokerage said the resignation of the MD and CEO, a year ahead of the completion of his term, along with several other senior-level exits, reflects continued execution issues. Any improvements in performance under the new CEO are likely to be gradual, it added.

Morgan Stanley also remains 'underweight' on the counter, with a target of Rs 450. The company says the CEO's announcement is a surprise to the market, given the incumbent's tenure is expected to last until July 2025. The brokerage believes the transition could create uncertainty in the near term before boosting hopes of a potential turnaround.

Nomura also continued with its 'reduce' view on the counter, with a new target set at Rs 410.

However, Macquarie, among all other brokerages, is bullish on the stock and maintains an 'outperform' view with a target pegged at Rs 570 per share.