Shares of IT major Wipro jumped sharply in early deal on Wednesday, after the company came out with better-than-expected numbers for the first quarter of current fiscal.

Buyback expectation was the major trigger for the big rally. However, the result has divided analysts, as some turned bullish on the stock.

Wipro on Tuesday declared results post market hours. By posting a flat net profit of ₹2,390 crore, a marginal rise of 0.12 per cent YoY, for the first quarter of 2020-21, Wipro surprised the Street, which was expecting a 8-10 drop in profits due to the Covid-19 impact. The Bengaluru-based company’s consolidated revenue rose from ₹14,716 crore to ₹14,913 crore).

Shares jumped almost 20 per cent to a high of ₹268.70 in the opening session and currently ruling at ₹259, up 15.11 per cent, over the previous day’s close. Wipro is the biggest gainer in both Nifty and the Sensex.

According to marketmen, short covering also aided the spurt in the stock.

Citi upgrades

Citigroup upgraded the stock to buy from neutral with a price target of ₹260 from ₹230. It managed the costs well and delivered solid cash flows despite lagging peers on growth, said Citi and added it is under a ‘positive 90-day Catalyst Watch’ given the potential buyback and growth focused commentary from new CEO.

Motilal Oswal, which maintained its neutral stance on Wipro with a price target of ₹257, said: “We believe Wipro is a good re-rating candidate due to the upside of a turnaround under the new CEO; possibility of an impending buy back; relatively attractive valuations (v/s TCS and Infosys, 13x 1-year forward P/E.”

However, before turning constructively positive on the stock, a refresh of the company’s strategy and further evidence related to execution need confirmation said Motilal Oswal.

However, expecting more clarity on the new CEO’s strategy in the next three months, Macquarie maintained its neutral stance on Wipro with a price target of ₹210. Similarly, though CLSA maintained its Underperform rating, it revised the target price higher to ₹215 from ₹210.

Wipro did not provide a formal revenue outlook for the September quarter. It aims for stability and holding margins in a narrow range going forward, said Emkay Global, which retained its Hold stance on Wipro but raised the price target to ₹240 from its earlier ₹210.

As expected, Wipro has not given revenue growth guidance for Q2 FY21 due to the uncertainties as regards the Covid-19 pandemic, said IDBI Capital, and added: however, it confirmed that the revenue visibility for Q2 is much better than that the start of Q1. IDBI Capital has revised the price target higher to ₹233 from ₹189 earlier.

comment COMMENT NOW