Wipro Q3 Review — Result Beat; Commentary Seeing Improvement; Dolat Capital Maintains 'Reduce' On The Stock

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Dolat Capital Report

Wipro Ltd.’s IT services saw flattish constant currency revenue QoQ growth of 0.1% (our estimate -0.8%), mainly led by health BU, up 6.7% QoQ, while banking, financial services and insurance, consolidated and tech and communication declined 1.9%/0.9%/0.6% in CC terms due to seasonal factors. I.T services operating profit margin stood at 17.5%, up 68bps QoQ (our estimate: 15.6%) with beat led by continued operating efficiency across biz. lines.

Total contract value wins/large deal wins at $3.5 billion/$0.96 billion were healthy, but Q4 guidance of -1% to 1% CC growth reflects cautious optimism. While the commentary on discretionary spends and pipeline is constructive for Q2, it may be early to call a secular trend across verticals.

We raise our FY25E/FY26E/FY27E earnings by 7.4%/2.9%/1.2% noting improved OPM performance. However, despite few positives, we believe that a clear and convincing recovery is necessary and that current valuations are still pricey. Therefore, we maintain ‘Reduce’ rating with target price of Rs 300 at 23 times FY27E earnings.

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