Elara Capital

Wipro (Buy)

CMP: ₹269.15

Target: ₹335

Wipro revenue at $2,038.8 million was down 0.7 per cent q-o-q and up 5.9 per cent y-o-y in constant currency (CC) terms adjusted for divestment of workday & cornerstone in some Europe countries and divestiture of the data centre business. While y-o-y comparison is relatively easy, given the large deal with Alight only started in 3QFY19, growth has been strong in parts of the services portfolio outside of the digital operations & platform services with data, analytics & AI and cloud & infrastructure services growing 11.5 per cent y-o-y and 6.6 per cent y-o-y, respectively, in CC terms.

Valuation: We lower our revenue estimate by 3.6 per cent for FY20 and 3.5 per cent for FY21 after factoring in lower USD-INR at 71.6 from 72.7. We also lower margin by 140 bps for FY20E and 88bp for FY21E as we now anticipate the drag on profitability from the India state run enterprise (ISRE) segment to remain as contracts will unwound gradually. We introduce FY22E and retain our ‘buy’ rating and arrive at a lower target price ₹335 from ₹340 on15x (unchanged) FY21E P/E.