Wipro's September quarter results beat analyst estimates on a couple of fronts. The IT major reported a constant currency (CC) revenue growth of 0.6 per cent sequentially, beating analyst projections of flat growth. Margins for Wipro came in at 16.8 per cent, which also surprised analysts, as it came despite a one-month impact from wage hikes. This was the highest margin for any quarter since Q3FY22, taking Wipro one step closer to the aspirational range of 17-17.5 per cent. That said, Wipro's Q3 revenue growth guidance disappointed, as analysts kept their 'Hold' ratings on the stock, citing fair valuations.
The total contract value (TCV) stood at $3.5 billion for the quarter. The large deal wins at $1.5 billion were strong, said Nirmal Bang Institutional Equities, which cited that the trailing 12-month large deal TCV hit $4.75 billion, the highest ever.
"The rest of the order book is a blend of mid-sized and small deals, indicating some short term deals are back in the pipeline. Wipro has been a beneficiary of vendor consolidation where it has got the end-to-end project by eliminating peers," it said.
Revenue growth guidance (CC) for Q3 at minus 2 per cent to nil is a bit soft, factoring in normal furloughs, softness in Europe and marginal impact from wage hikes. Nirmal Bang suggested a target of Rs 600 on the stock, as it maintained its 'Hold' rating.
Wipro had a strong quarter with healthy revenue growth and robust deal momentum. However, there are areas of concern that warrant cautiousness, said MOFSL.
"The guidance for Q3FY25 is muted due to furloughs and softness in key regions, particularly in Europe. Additionally, sectors like manufacturing and energy remained soft, with signs of a potential revival but no immediate turnaround making these verticals more of a long-term play," it said.
The brokerage has raised its FY25 EPS estimate by 2 per cent to factor in the margin beat but kept FY26 and FY27 EPS estimates broadly unchanged. It suggested 'Neutral' rating and a target price of Rs 500 on Wipro, saying the current stock valuation is fair.
"Post the weak 3Q guidance we reduce our revenue forecast by 1-2 per cent for FY26/27, while we reduce EPS estimates by 2-3 per cent. We maintain HOLD rating and keep our target price unchanged at Rs 575 despite a 3 per cent cut in FY27 EPS as we roll over the valuation multiple to FY27 (from 1HFY27), which is at a 15 per cent discount compared to its peers-Infosys and HCL tech," Antique Stock Broking said.