Wipro Drops Most Since April, Analysts Await Broader Recovery

(Bloomberg) — Shares of Wipro Ltd. slipped the most intraday in six months after its quarterly profit missed estimates, with some analysts saying they want to see more evidence of business recovery under the new leadership.

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The software exporter posted July-September net income of 24.7 billion rupees on Tuesday, down 3.1% on-year and below an estimate of 25.2 billion rupees in a Bloomberg survey. The company also said it will spend as much as 95 billion rupees ($1.3 billion) buying back its shares at 400 rupees each.

Wipro’s stock slumped as much as 6.9% and was the worst performer on the benchmark NSE Nifty 50 Index on Wednesday. Investec, Antique Stock Broking and Spark Capital Advisors were among brokers that downgraded the stock.

“We await further evidence of execution of Wipro’s refreshed strategy and a successful turnaround from its growth struggles over the last decade before turning more constructive on the stock,” Mohit Sharma, an analyst at Mumbai-based Motilal Oswal Financial Services Ltd., wrote in a note.

Here’s a roundup of brokerage views:

Emkay Global Financial Services Ltd. (Dipesh Mehta)

Wipro made some progress in accelerating growth in the last few quarters but it is still not broad-based and consistent; business strategy under new leadership needs to be seenRevenue growth saw broad-based recovery sequentially, led by business verticals of communications, consumer, healthcare financial services and manufacturing; technology vertical continued to show softness in growthAssume coverage with Hold and PT360 rupees given rich valuations and patchy performance in the past

JM Financial Institutional Securities Ltd. (Manik Taneja)

October-December quarter outlook is a tad better than expectedCompany needs to deliver in-line growth through 1H of a fiscal, which hasn’t happened through the years, to show sustainable turnaround; historically, Wipro tends to outperform or grow in line with peers through 2HRaises FY22-23 EPS by 2%-3% driven by slight increase in revenue and margin assumptions; stay on Hold with a revised PT of 360 rupees

Prabhudas Lilladher (Aniket Pande)

Increases EPS estimates by ~6.6% average for FY22/23, led by strong revenue growth and sustainable margin performanceHigher revenue guidance indicates strong revenue momentum will continue for IT companies in H2FY21; guidance is reflective of strong deal pipelineNew chief executive officer has outlined new strategic direction with focus on growth, prioritizing investments in areas of competence and scale, augmenting talent pool and simplification of operating model; stock rated Buy with PT415 rupees

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