Wipro is an IT, consulting & BPO player catering to BFSI, health, consumer, energy & utility, technology and communication.
Wipro reported weak Q3 results on the revenue front.
Wipro’s share price has grown by ~1.6x over the past five years (from ~₹ 245 in January 2018 to ~₹ 393 levels in January 2023).
We value Wipro at ₹ 455 i.e., 16x P/E on FY25E EPS
Besides Wipro, in our IT coverage we also like TCS.
Strong organic growth, consistent financials, industry leading margins and healthy capital allocation policy prompt us to be positive on the stock with a BUY rating and a target price of ₹ 3,780
|Particulars||FY20||FY21||FY22||5 Year CAGR(FY17-FY22)||FY23E||FY24E||FY25E||3 Year CAGR (FY22-FY25E)|
|EBITDA Margins (%)||20.6||24.2||22.3||-||19.7||20.6||20.8||-|
|Q3FY23||Q3FY23E||Q3FY22||YoY (%)||Q2FY23||QoQ (%)||Comments|
|Revenue||23,229||23,294||20,319||14.3||22,540||3.1||IT services revenue grew 0.6% QoQ in terms while dollar revenue grew 0.2% QoQ. The company indicated that revenue was impacted by furloughs & lower discretionary spend|
|Employee expenses||16,328||16,743||14,278||14.4||16,384||-0.3||Employee cost flat on account of lower attrition & pyramid optimisation|
|Gross margin (%)||29.7||28.1||29.7||-2 bps||27.3||240 bps|
|Selling & marketing costs||1,775||1,695||1,399||26.9||1,514||17.3|
|EBITDA Margin (%)||20.0||18.4||21.2||-118 bps||17.9||206 bps|
|EBIT Margin (%)||16.0||14.8||17.5||-149 bps||14.4||162 bps||IT services EBIT margin improved 120 bps QoQ to 16.3% on account of lower attrition, automation led efficiency & shift of some expenses to TTM from fixed pricing mechanism|
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