Wipro shares up 2% on Q3 results. What should investors do now?

NEW DELHI: Shares of Bengaluru-based IT major Wipro, which was among the worst Nifty performers in 2022, rallied up to 2% on Monday on reporting a mixed set of numbers in the December quarter.

Brokerages said Wipro's revenue growth of 0.6% QoQ CC was below Street estimates while EBIT margin uptick of 120 bps QoQ to 16.3% was a positive surprise.

The stock, which lost over one-third of its value in the last one year, rallied up to 1.84% to Rs 400.90.

Here's what brokerages said on Wipro after Q3 results:

Nomura
With a neutral rating, Nomura has not changed its target price of Rs 425 on Wipro. While asking investors to brace for near-term weakness, it said increasing deal tenures are leading to delay in translation to immediate growth.

Kotak Institutional Equities
While maintaining reduce rating on Wipro, Kotak has raised its estimate of fair value of the stock to Rs 425. "Wipro has been caught amid a likely slowdown (1) executing a difficult turnaround and (2) managing large acquisitions that increased its exposure to discretionary spends, which are prone to pullback during periods of uncertainty, raising the risk profile of the business. We expect Wipro to continue to underperform peers on revenue growth over FY2023-25E," it said.

YES Securities
YES has a neutral rating on Wipro with a target price of Rs 432. "We estimate revenue CAGR of 11.7% over FY22-24E with average EBIT margin of 15.3%. We maintain our Neutral rating on the stock with a revised target price of Rs 432/share at 18.0x on FY24E EPS. The stock trades at PER of 18.9x/16.5x on FY23E/FY24E EPS," it said.

Sharekhan
Sharekhan has a hold rating on the IT stock with a target price of Rs 420, given muted guidance despite strong deal bookings and a robust deal pipeline. "Wipro’s revenue growth guidance of -0.6-1% QoQ in CC for Q4FY23 was muted despite large deal TCV over $1 billion in Q3FY23 (up 50% y-o-y). Management said the macro-economic uncertainty continues with softness in retail sector in the US but there is no concern of slowdown because of the large deal momentum," it said.

Motilal Oswal
The brokerage has a neutral stance on the stock and said the current valuations are fair. "We raise our FY23 and FY25 EPS estimate by 4% but lower our FY24 EPS estimate marginally to factor in weaker growth next year due to a lower exit rate in 4Q," it said.

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