Wipro share price, Wipro Q3 results: Wipro shares in trade on Monday, January 15, after gaining as much as 13 per cent to Rs 526.45, settled 6 per cent higher at Rs 494.55 after posting good Q3 numbers. The company reported a 1.8 per cent increase in its consolidated net profit on a sequential basis to Rs 2,694 crore, in line with Zee Business Research estimates of Rs 2,600 crore.

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The company’s revenue in constant currency terms fell by 1.7 per cent quarter-on-quarter, while it was down by 6.9 per cent compared to Q3 FY22. Its operating margin for the third quarter stood at 16 per cent.  However, it was better in contrast to estimates of 2.5 per cent degrowth in revenue. Also, IT service margin has come in at around 16 per cent versus estimates of 15.1 per cent.

Wipro ADR posted the highest 1-day gain of 17 per cent in 16 years after Q3 show by the company. Jefferies on the American Depository Receipt (ADR) performance said the ADR upside of 18 per cent reflects that too much optimism is priced in. Further, the Zee Business Research desk highlighted that after the IT services major Q3 show, the company's ADR has logged the highest 19 per cent gain intraday.

What had been the major boosting pointers in Wipro's Q3 results?

Zee Business research team highlighted that the company logged 20 per cent year-on-year growth in large deal wins. Furthermore, there has been a phenomenal recovery in the company's consulting business-Capco. Wipro acquired Capco in 2021. Also, the research desk pin-pointed that as the economic situation is improving, the company is expected to showcase good performance in Artificial Intelligence or AI.

How brokerages view Wipro post Q3?

The brokerages are largely divided on Wipro post the company’s strong operational performance.

Wipro (CMP: 465) 
Brokerage  New Rating  Old rating  New Target  Old Target 
JP Morgan  Neutral  Underweight  500  420 
Morgan Stanely  Underweight    460  405 
Jefferies  Underperform    470  385 
Goldman Sachs   Sell    420  385 
Nomura  Reduce    410   
HSBC  Reduce    350   

Jefferies maintains that the Q3 results beat estimates mainly led by higher margins. Weak Q4 growth guidance and continued headcount declines are not inspiring, noted the brokerage. The brokerage raised its EPS estimate by 4-10% on margin beat.  

Brokerage firm Nomura while maintaining a reduce call on the IT major said 3Q beat is largely on revenue and margin. Discretionary demand showing early signs of a recovery, the brokerage added. Moreover, it said that the margin improvement is unlikely in FY24E.  Nonetheless, caution stance is kept amid weak Q4 guidance and soft deal.

Domestic brokerage JM Financial said the company's Q3 show suggests inflection. The brokerage noted that the company's CAPCO business logged double digit booking growth.

That, we believe, is a first quantitative sign of rebound in discretionary spend. CAPCO’s exposure to discretionary budget plagued the company's recent performance, noted the brokerage. 

"5x consulting-to-downstream services revenue equation could drive growth convergence with peers, validating Wipro’s, and Thierry’s, initial strategy. Moreover, the company’s margin resilience means incremental revenues could percolate down, supporting earnings trajectory. "Our FY24-26E EPS CAGR for Wipro is 16%, highest among top-4. PER, on the other hand, is the least. WPRO’s PER discount to Infosys has widened to 26%, vs past-5 year average discount of 19%. 4Q guided growth band for both have converged, which should narrow the valuation gap, in our view. We raise our target multiple for WPRO to 20x (from 18x). Changes to our EPS are limited. But our FY25/FY26E EPS are 3%/8% above Street’s, implying upgrade potential. We retain BUY with a revised TP of INR 550 (from INR 500)," said the brokerage.