Wipro Ltd Stock Research Report

Miss on Growth Estimates; Outlook Weak

Est. Vs. Actual for Q2FY25: Revenue – MISS ; EBITDA Margin – MISS; PAT –
MISS; Deal Wins – BEAT

Changes in Estimates post Q2FY25 (Abs.)

FY25E/FY26E: Revenue –1%/-2%; EBITDA Margins –1%/-2%; PAT –1%/-2%

Recommendation Rationale

• Ongoing uncertainties are leading to delays in decision-making by clients, particularly in the automation segment. However, the management has observed a pickup in the consulting business.
• On a positive note, the company’s TCV remained strong at $3.3 Bn in Q2FY25.
• The company currently lacks clear visibility on revenue growth, raising concerns about its growth momentum compared to its peers.

Sector Outlook: Cautiously positive

Company Outlook & Guidance: Revenue growth guidance for Q2FY25 is in the range of -2% to 0% on a QoQ basis.

Current Valuation: 19x FY26E P/E; Earlier Valuation: 19x FY26E

Current TP: 470/share (Earlier TP: Rs 470/share)

Recommendation: Wipro has lagged in its execution despite achieving better results and securing higher deal wins. However, FY25E may witness some recovery supported by these strong deal wins. Given the lack of necessary visibility, a SELL rating is recommended for the stock.

Wipro Ltd Stock Research Report

Financial Performance

In Q2FY25, Wipro’s reported revenue came in below expectations at Rs 22,303 Cr, reflecting a 2% QoQ growth and 0.6% QoQ growth in CC terms. The company reported operating profits of Rs 3,037 Cr, a 2% improvement in QoQ. However, operating margins declined as expected, standing at 15.2%, primarily due to cost optimization efforts. Net profit for the company stood at Rs 3,227 Cr, registering a 6% QoQ growth.

Outlook

From a long-term perspective, Wipro has a strong deal pipeline and a solid financial structure. However, it falls behind its peers in execution capabilities, limiting its ability to fully capitalize on growth opportunities. Additionally, rising concerns regarding the prospects of major economies, coupled with prevailing supply-side constraints, create uncertainties over the company’s short-term growth rates.

Valuation & Recommendation

Given the above-mentioned factors, we recommend a SELL rating on the stock, assigning a 19x P/E multiple to its FY26E earnings of Rs 24.6/share, resulting in a TP of Rs 470/share. This TP implies a downside of 11% from the CMP.

Key Financials (Consolidated)