Shares of Wipro Ltd. rose the most in over a month after it raised revenue guidance for the September quarter.
This prompted Nomura to raise the company's price target by Rs 5 to Rs 375 apiece while maintaining a 'neutral' rating on the stock.
The company's revenue fell 1.54% from the previous three months to Rs 22,831 crore in the quarter ended June, according to an exchange filing on Thursday. That compares with the Rs 22,992 crore consensus estimate of analysts tracked by Bloomberg.
The company now expects revenue from its IT services business to be in the range of $2.72 billion to $2.80 billion in the July-September quarter. That equates to a sequential guidance range of -2.0% to +1.0% in constant currency terms. After Q4 FY23, Wipro had pegged its guidance at -3.0% to -1.0% in Q1 FY24.
Wipro: Q1 FY24 (Consolidated, YoY)
Revenue down 1.54% to Rs 22,831 crore. (Bloomberg estimate: Rs 22,992 crore)
EBIT at Rs 3,458 crore versus Rs 3,659 crore. (Bloomberg estimate: Rs 3,612 crore)
Margin at 15.14% versus 15.77%. (Bloomberg estimate: 15.7%)
Net profit down 6.63% to Rs 2,870 crore. (Bloomberg estimate: Rs 2,989 crore).
Shares of the company rose 0.15% to Rs 394.85 apiece, compared to a 0.39% advance in the NSE Nifty 50 at 9:30 a.m. The stock rose nearly 1.7% intraday to hit Rs 400.95 apiece, the most in over a month since June 9, 2023.
The scrip has risen 0.52% on a year-to-date basis as compared to 4.47% gains in the Nifty IT Index in the same period. Total traded volume stood at 2.9 times its 30-day average. The relative strength index was at 56.
Of the 47 analysts tracking the company, 11 maintain a 'buy' rating, 18 recommend a 'hold' and 18 suggest a 'sell' on the stock, according to Bloomberg data. The average 12-month consensus price target implies a potential downside of 3.7%.
Also Read: Stock Market Today: Sensex, Nifty Rise For A Third Week As IT Drives Best Gains In 10 Sessions
Nomura Maintains 'Neutral' Rating On Wipro
Brokerage remains 'neutral' on the stock, while raising its price target from Rs 370 apiece to Rs 375 per share.
June quarter earnings missed consensus estimates and were towards the bottom end of the guidance given by the company.
Management noted that the growth was impacted by lower discretionary spends. Revenue decline was the sharpest in the American and European regions, geographically, whereas the fall was the highest in the BFSI and energy spaces among verticals.
Discretionary demand remains weak, which is affecting the consulting portfolio of the company, as per the brokerage.
Revenue was sluggish as clients’ focus shifted to upfront cost savings and delays in ramp-ups. Lower discretionary demand continued to affect early cycle businesses like consulting.
Wipro's revenue growth guidance for the September quarter was in the range of -2% to +1% in constant currency terms, which is marginally better than Nomura's estimate of -2% to 0%.
Attrition continued to trend downward and stood at 17.3%. Employee headcount declined by approximately 3.4% as the company remains cautious about filling the roles of departing staff. Overall, for FY24, Nomura expects an EBIT margin of 15.3%.
Downside risks to the price target include weaker-than-expected revenue growth, whereas an upside would be aided by better margin performance.
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