Introduction: Wipro, one of India's prominent IT companies, witnessed a remarkable 13.10% surge in its stock price on Monday, reaching a circuit limit of Rs 511.95 on BSE. The positive momentum continued from a 15% rise in the last month, outperforming industry peers like HCL Tech, Infosys, and TCS. The surge is attributed to Wipro's Q3 results, with analysts noting significant developments and cautious optimism.
Green Shoots in Discretionary Spending: Analysts suggest that Wipro stands out among its peers, as it signals "green shoots" in discretionary spending. The Q3 results showed a degrowth in revenues at the upper end of the guided band, a noteworthy shift after four quarters. Wipro's consulting business, CAPCO, displayed double-digit booking growth, hinting at a potential rebound in discretionary spending.
Analyst Perspectives:
- JM Financial: Acknowledges Wipro's inflection point, emphasizing the positive signs in discretionary spending through CAPCO's performance.
- Axis Securities: Cautious about Wipro's execution lag but anticipates a potential recovery in FY25 with strong deal wins.
- HDFC Institutional Equities: Highlights Wipro's trajectory recovery but remains concerned about factors like deal market-share loss and decline in T5 accounts.
Financial Performance: Wipro reported a constant currency revenue degrowth of 1.7% for Q3, close to the upper end of its guidance. This outperformed analyst projections of 2-4% degrowth. The company's rigorous cost control strategies led to a margin beat of 50 basis points, earning positive commentary from Kotak Institutional Equities.
Analyst Recommendations:
- Kotak Institutional Equities: Cautions against a quick demand recovery despite positive elements, retains a "REDUCE" rating with a target of Rs 430.
- Motilal Oswal: Expects Wipro's FY24 revenue growth rate to be among the lowest in tier-1 IT services, retains a 'Neutral' stance with a target of Rs 520.
- Nuvama Institutional Equities: Anticipates gradual improvements but suggests a target of Rs 460 due to Wipro's underperformance relative to peers.
Conclusion: While Wipro's stock rally post-Q3 results is indicative of positive developments, analysts exercise caution and emphasize the need for sustained improvement. Wipro's focus on partner ecosystem growth and operational enhancements remains pivotal as the company navigates challenges and strives for a successful turnaround. Investors are advised to monitor future developments closely before making decisive moves in the market.
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