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Axis Securities Report
In Q4 FY24, Wipro Ltd.'s reported revenue stood in line with our expectations at Rs 22,208 crore, flat QoQ and 5.9% QoQ (in CC terms). The company reported operating profits of Rs 3,287 crore, flat on a QoQ basis.
However, its operating margins expanded in line with our expectations and stood at 15%, largely led by cost optimisation. The company's net profit stood at Rs 2,858 crore, registering a growth of 6% QoQ.
Outlook
From a long-term perspective, we believe Wipro has a strong deal pipeline and superior financial structure. However, it lags in execution capabilities to capitalize on growth as compared to peers.
Moreover, rising concerns over the prospects of large economies along with prevailing supply-side constraints pose uncertainties over the company's short-term growth rates.
Valuation and recommendation
Against this backdrop, we recommend a Sell rating on the stock and assign a 16 times price/earning multiple to its FY26E earnings of Rs 24.6/share to arrive at a target price of Rs 405/share. The target price implies a downside of 11% from the current market price.
Key risks to our estimates and target price
The uncertain demand environment is influenced by the potential threat of recession from the world's largest economies.
Rising subcontracting costs and cross-currency headwinds may negatively impact the company's operating margins.
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