Credit Suisse downgraded Wipro to neutral from outperform but maintained a 12-month target price of Rs 650. The valuation support may not be enough for lack of growth pickup, the investment bank said.
It said continued lack of visibility in growth acceleration relative to its peers can be a drag. Muted guidance by the management does highlight lack of significant pickup in growth.
Wipro posted revenue of $1,882 million, up 2.7 per cent quarter-on-quarter in constant currency terms, compared with the guided revenue growth band of 2-4 per cent. Thus, it came at the lower end of the guidance band.
Wipro’s Q1FY17E guidance was muted at 1-3% QoQ growth ($1,901 million to $1,939 million) factoring in full consolidation of HPS and Viteos.
Growth challenges continued in top account mining and in verticals such as BFSI, E&U and telecom & media, experts pointed out.
Morgan Stanley, too, has downgraded the stock to underweight from equal weight and slashed its target price to Rs 516 from Rs 566 earlier. The investment bank said Q4 revenue growth came in at the lower end of its guidance.
“The guidance for Q1 of F17 does not suggest any meaningful acceleration in core organic business,” it said. Morgan Stanley expects PE discount to widen and the EBIT margin to come under pressure. The 1.6 per cent of shares buyback is unlikely to be a material stock driver in the absence of growth visibility, added the brokerage note.
But not everybody is pessimistic on Wipro. CLSA in a note said it maintained an outperform rating on the stock and has raised its 12-month target price to Rs 650 from Rs 630 earlier.
In an attempt to boost growth, the management highlighted its strategy towards revenue ambition of reaching $15 billion by 2020, which was categorised under six themes: Digital, Client-mining, Geographies, Non-linearity, Hyper-automation and Partner ecosystem.
CLSA believes the IT major reported a soft print with flat organic growth and has guided to another weak Q1 in FY17. The buyback of 1.6 per cent of outstanding shares is likely to provide near-term share price support.
The global investment bank said the CEO’s detailed recovery plan appears promising in its intent and focus areas.