Wipro crashes 6% after Q2 results, brokerages see more pain for IT major

Following a poor performance in the Q2FY23, brokerage firms remain cautious or negative on the counter and believe that the worst is not over for the stock citing the cautious approach of the management and muted guidance.

Contrary to Dalal Street estimates, the IT services major’s net profit declined over 9 per cent to Rs 2,659 crore in the quarter ended on September 30, 2022, from Rs 2,930.7 crore in the year ago period.

Revenue from operations stood at Rs 22,539.7 crore, a 14.60 percent growth over a year ago. It reported a revenue of Rs 19,667.40 crore in the same quarter previous year.

Despite the muted performance, global brokerage firm CLSA has maintained an outperform rating on Wipro, with a target price of Rs 450 on the stock, signalling about 18 per cent upside in the counter from its Thursday’s lows.

“Q2FY23 results were in line with the estimates,” said the brokerage firm. “Hopeful FY23 commentary but conservative Q3FY23 guidance,” it added.

However, another brokerage firm Citi has maintained its sell call on the IT major with a target price of Rs 370 on the counter. “Q3 growth guidance was below the expectations, which was not a big surprise,” it said.

Among the domestic brokerages,

remains neutral on the counter with a target price of Rs 380 on the stock, which is proximate to its intra-day lows.

Wipro posted a weak set of Q2 earnings, “we expect its FY23 organic growth to be one of the lowest among Tier-I IT Services play, with margin below the management’s medium-term guided range,” said the brokerage firm.

“We lowered our stimate by up to 6 per cent to factor in a miss on margin,” it added. It is awaiting further evidence of the execution of strategy, and a successful turnaround from its growth struggles over the last decade before turning more constructive on the stock.

However, another broker Nirmal Bang Institutional Equities has maintained its sell rating on the stock with a target price of Rs 340 on the counter.

According to Nirmal Bang, the significant de-rating seen in the last 9-12 months is reflective of the concerns on EPS estimates. “The company’s large deal TCV of $1.85 billion in 1HFY23 and a strong pipeline give comfort for double-digit CC revenue growth that it has indicated in FY23,” it said.

“There is no sign of any slowdown, except that the market has changed and certain uncertainties are impacting clients,” Nirmal Bang said. “The net hiring of only 600 employees in 2QFY23 against 12,000 on an average in each of the last four quarters indicates its aim to push up utilization to improve margins,” it added.

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