Wipro soars 13% to new 52-wk high, in a seasonally-soft quarter

Shares of Wipro hit soared 13 per cent to a fresh 52-week high of Rs 526.45 on the BSE in Monday’s intra-day trade as the company beat profit estimates in its third quarter results. (Q3FY24).

At 09:32 am; Wipro was quoting 11 per cent higher at Rs 518.95 as compared to a 0.91 per cent rise in the S&P BSE Sensex.

The average trading volumes on the counter jumped more than two-fold. A combined 18.5 million equity shares changed hands in less than 20 minutes since trading began on NSE and BSE.

Motilal Oswal Financial Services (MOFSL) sees Wipro’s Q3 performance as positive as the company struggled to deliver on expectation over the last few quarters due to macro headwinds.

It said the management’s commentary on higher deal wins in the Consulting vertical indicates that the drag from that segment is now bottoming out, which should help improve overall growth.

“In a seasonally-soft quarter, deal booking momentum remained strong. Our large deals recorded a 20 per cent year-to-date growth. Further, we are starting to see early signs of a return to growth in consulting, as demonstrated by the double-digit growth in order bookings in our Capco business,” said Thierry Delaporte, chief executive officer (CEO) and managing director (MD), Wipro.

Though, Wipro has forecast a muted sequential revenue growth of -1.5 per cent to 0.5 per cent in constant currency for the fourth quarter ending March 2024 as deal ramp ups and client decision making are yet to gain pace.

The company posted a net profit of Rs 2,700 crore for the third quarter ended December 2023, down 12 per cent from a year ago but up 1.2 per cent quarter-on-quarter (QoQ).

It reported an order intake of USD3.8 billion (flat QoQ), with a large deal total contract value (TCV) of USD0.9 billion (down 8.3 per cent QoQ).

Wipro reported IT Services revenue of $2.66 billion in Q3FY24, down 1.7 per cent QoQ on constant currency (CC), near the upper end of its guidance and 100 bps ahead of our estimate, said MOFSL.

Despite four straight quarters of revenue decline, Wipro has provided muted guidance for Q4, with $ CC revenue performance to be in the range of -1.5 per cent to +0.5 per cent QoQ.

Despite revenue growth in Q3, it maintained its IT Services EBIT margin at 16.1 per cent (flat QoQ) ahead of our expectation of 15.1 per cent due to better cost control and lower employee count, said MOFSL.

MOFSL believes that Wipro’s weak Q4FY24 revenue growth guidance is a concern, along with unchanged commentary on demand and discretionary spending.

“While we expect Wipro to return to growth in FY25 after posting a decline in FY24, the weak base should result in revenue growth lower than that of peers. We expect it to deliver a 3.9 per cent CAGR in IT Services revenue over FY23-26,” it said, keeping its neutral rating on the stock.

MOFSL said they await further evidence of the execution of Wipro’s refreshed strategy, and a successful turnaround from its struggles over the last decade before turning more constructive on the stock. Business Standard