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Shares of Wipro Ltd plunged more than 6% to hit a 52-week low of ₹383 apiece on the BSE in Thursday’s early trading session after the IT services major reported an over 9% drop in its September quarter net profit to ₹2,659 crore, weighed down by rising staff expenses and lower non-US earnings.
The Bengaluru-based company’s revenue from operations stood at ₹22,539 crore, up 14.6% growth over ₹19,667 crore in the previous year. Wipro in its outlook for the December quarter said it expects revenue from our IT services business to be in the range of $2,811 million to $2,853 million. This translates to a sequential growth of 0.5% to 2%.
“We lower our FY23/FY24 EPS estimate by 6%/2% to factor in a miss on growth and elevated risk. We maintain our Neutral stance as we view the current valuation as fair,” said domestic brokerage and research firm Motilal Oswal in a note.
The brokerage maintained its Neutral stance on Wipro shares with a target price of ₹380 as it awaits further evidence of the execution of Wipro’s refreshed strategy, and a successful turnaround from its growth struggles over the last decade before turning more constructive on the IT stock.
“Wipro reported a modest Q2 performance. The revenue growth and margins were both soft, but broadly in line with expectations. Q3 revenue growth guidance was disappointing. EBIT margins of 15% in H1, with two months of wage hike impact yet to come (in Q3), means the company will not be able to report margins much above its declared floor of 15%,” said PhillipCapital
Over the last eight quarters, Wipro’s margins have fallen by over 600 bps, primarily due to acquisitions like Capco and Rizing, which have led to a big reset at gross margin levels.
These acquisitions have also consumed significant cash – ruling out any buyback in near future. All that has not led to any significant outperformance on the growth front – as Wipro appears likely to report, below industry average growth in FY23, it highlighted.
“Overall, we do not see any trigger in Wipro stock, that might lead to its rerating, after the sharp correction (CYTD, -43%). Inexpensive valuations and high dividend yield limit the downside potential of the stock,” the note stated. The brokerage has maintained its Neutral rating on the stock with a target price of ₹390.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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(This story has not been checked by Kashmir Bulletin and is auto-generated from other sources)
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