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Centrum Broking
Wipro (Add)
CMP: ₹187.8
Target: ₹220
Wipro’s Q4FY20 results were a modest miss on revenues. However, margins were a steeper disappointment which led to PAT miss our estimates by 7 per cent for 4QFY20.
Wipro’s US dollar revenues grew by 1.7 per cent in FY20 (3.1 per cent constant currency growth). Organic USD revenue growth would be 1.2 per cent for FY20 and rest from ICICI deal, ITI acquisition and full impact of Alight deal revenues.
Owing to Covid-19, we have already build steep weakness in 1HFY21 and modeled recovery in revenue growth from 2HFY21 onwards. We have already downgraded our estimates in our preview report.
Post 4QFY20, we retain our expectation of 6 per cent decline in USD revenues for Wipro in FY21E. However, we build recovery in FY22E and model 3 per cent USD revenue growth in FY22E. Owing to tepid margin execution in 4QFY20, we further trim our margin assumptions for FY21/FY22E which leads to 6.5/5 per cent EPS cut for FY21/FY22E respectively.
We trim our target price by 5 per cent to ₹220/share (13x FY22E EPS). Retain ‘Add’.
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