Wipro shares rose 1.20 percent to ₹398.60 apiece during Monday's trade after the company's Q3 results came in line with market expectations. The Bengaluru-based company on Friday posted a 2.8 percent rise in its consolidated net profit at ₹3,053 crore for the December quarter. The company had posted a net profit of ₹2,969 crore in the year-ago quarter.
The revenues of Wipro came in at ₹23,229 crore in Q3FY23, a growth of 14.34 percent compared to ₹20,315 during the same period of the previous year.
In Q3FY23, Wipro had record order bookings of over $4.3 billion, up 26 percent YoY in CC terms. The company won 11 large deals of over $1 billion. The management stated there are more large deals in the pipeline and expects the momentum to continue in Q4FY23 and Q1FY24.
The company indicated that order bookings remain strong across geographies, with America2 and Europe reporting YoY growth of 40 percent and 25 percent, respectively.
Despite such strong bookings in Q3, the company expects IT services revenue to grow in the range of -0.6 percent to 1 percent sequentially in constant currency in the quarter ending March 2023.
For the full year, the company expects revenue growth from the IT services business to be in the range of 11.5–12 percent in constant currency terms.
Following the Q3 results, domestic brokerage Sharekhan has maintained a "hold" rating on the stock with an unchanged target price of Rs. 420 apiece on the back of muted guidance despite strong deal bookings and a robust deal pipeline.
Given the looming global headwinds, the outlook for FY24E looks uncertain, with a gradual recovery in the coming quarters. However, "we believe the structural growth story for the Indian IT sector remains intact," said the brokerage.
The EBIT margins of IT services segments came in at 16.3 percent, up 120 bps QoQ and above the brokerage's estimate of 15.3 percent.
Sharekhan stated that margin growth was led by strong operational improvements and automation-led efficiencies and came after the wage hikes and promotion incentives. The company would like to gradually improve margins from this level going forward, it added.
The cash conversion was robust at 143 percent of net income. The gross cash balance was $4.6 billion, and the net cash balance was $2.7 billion, according to Sharekhan.
ICICI Direct Research, on the other hand, has revised its rating from "hold" to "buy" with a target price of ₹455 apiece.
ICICI said that the company announced a key leadership change in America2, the Middle East, Japan, and Australia, which will likely provide a boost to revenue growth in the regions and higher penetration in Europe, client mining, the acquisition of new logos, and traction digital revenues will further boost revenue growth.
Meanwhile, HDFC Securities has maintained an "add" rating on the stock with a target price of ₹440 per share.
The IT major delivered in-line revenue, but its operating performance was better than expected. While its growth lagged tier-1 IT peers, its operating performance was better than peers (sequentially) in Q3, it said.
The company's deal bookings have been trending well, but that’s not adequately translated into revenue growth due to volatility in discretionary spending and a longer time to ramp up deals.
Meanwhile, in the last one year, the stock has lost nearly 39 percent of its value, falling from ₹646.65 apiece to the current position of ₹398.60. The Nifty IT Index has fallen 24.20 percent during the same period.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.