Comments
Centrum Broking
Wipro (Buy)
CMP: ₹346.45
Target: ₹375
Wipro’s Q3FY19 revenues were in-line with our estimate. EBITDA margin, however, beat our estimate, resulting in PAT coming in 13 per cent higher than our estimates. Consolidated EBITDA margin for 3QFY19 was 21.9 per cent, up 220 bps and delivered a sharp beat (our estimate: 19.3 per cent). There is a reversal in provision for deferred contract cost. This alone helped swing EBITDA margin by 110 bps in Q3. Adjusted for this, EBITDA margin would have expanded 100 bps q-o-q.
Wipro is showing steady acceleration in growth in select business units [BFSI (banking, financial services and insurance), Consumer and Energy & Utilities verticals]. Traction in top accounts also remains strong. While Wipro is yet to achieve full turnaround on an overall portfolio basis, we are encouraged by the green shoots.
We see potential for revenue growth acceleration in FY20E led by scope for turnaround in performance of the remaining SBU’s (Healthcare, Technology verticals). Post 3Q margin beat, we raise our EPS estimates by 5/3/2.5 per cent for FY19E/FY20/FY21E to Rs20/22.7/25.0, respectively. Post 35 per cent rally over the past six months, Wipro trades at 15.3x FY20E EPS and 14x FY21E EPS.
Resume coverage with a ‘buy’ rating and TP of ₹375 (15x FY21E EPS).
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.