Wipro falls 6.9% as brokerages downgrade stock

Mumbai: Shares of Wipro Ltd on Thursday fell as much as 6.9%, the maximum in 20 months, as brokerages downgraded the stock after the company reported weaker-than-expected earnings.

The stock touched a low of Rs.560 apiece, a level last seen on 11 April, and fell as much as 6.87%, the maximum fall since 25 July 2014. So far this year, it is up 0.3%.

Wipro added incremental revenue of $264.7 million in the year ended 31 March, lower than the $463 million in the previous year and much lower than what Tata Consultancy Services and Infosys Ltd have reported. Wipro reported 2.4% growth in revenue (dollar terms) in the quarter ended 31 March. For the fiscal year, the company’s revenue grew 7.6% in constant currency terms, Mint reported.

The management expects sequential revenue growth between 1% and 3% in constant currency terms in the April-June period of the current financial year, a marked improvement from the year-ago period when the firm forecast no growth in business, the report added.

Brokerages including Credit Suisse, Morgan Stanley, Nirmal Bang, Kotak Institutional Equities and PhillipeCapital have downgraded the stock.

Credit Suisse has downgraded the stock to ‘Neutral’ from ‘Outperform’ and kept its target price at Rs.650 a share, Morgan Stanley has downgraded it to ‘Underweight’ from ‘Equal Weight’ and cut its target price to Rs.516 from Rs.566 earlier, while Nirmal Bang has maintained its sell rating on the stock and cut its target price by 19% to Rs.489. PhillipeCapital has maintained its Sell rating on the stock and kept its target price at Rs.500 a share.

“We expect muted organic US$ revenue growth rate of 5% in FY2017E. We cut FY2017-18E EBIT (earning before interest and tax) estimate by 4-7% and EPS (earnings per share) by 1-3%. Valuations may appear inexpensive but justified for consistent growth underperformance. We maintain reduce rating; target price increases to Rs.560 (Rs.550 earlier) due to rollover, valuing the stock at 13X FY2018E earnings. While our net profit estimates decline by 4% for the next two years, our EPS estimate decline is restricted due to buyback of shares announced by the company,” said Kotak Institutional Equities, in a report to its investors.

Of the analysts covering the stock, 18 have a buy rating, 24 have a hold rating, while 12 have a sell rating, showsBloomberg data.