Shares of Bengaluru-based IT firm, Wipro, the share price opened 7.5% lower on Monday following the company’s June quarter results, which were reported after market hours on Friday and missed expectations. The share price of Wipro fell by 8.22%, reaching an intra-day low of Rs 511.40 on the NSE.
Q1FY25 Performance
IT major Wipro reported a consolidated net profit of Rs 3,003 crore (attributable to equity holders) for the quarter ended June 30, 2024, marking a 4.6% increase from Rs 2,870 crore in the same period last year.
Revenue from operations for the quarter stood at Rs 21,964 crore, down by 4% from Rs 22,831 crore reported in the corresponding quarter of the previous financial year. Gross revenue saw a 1.1% decline quarter-on-quarter, compared to Rs 22,208 crore in Q4FY24.
The IT services segment revenue was reported at $2,625.9 million, reflecting a 1.2% decline QoQ and a 5.5% decrease YoY. Non-GAAP constant currency IT services segment revenue also decreased by 1.0% QoQ and 4.9% YoY.
Total bookings for the reported quarter amounted to $3,284 million, with large deal bookings at $1,154 million. This represents a decrease of 3.1% QoQ and 3.6% YoY.
Management Guidance
For the quarter ending September 30, 2024, Wipro has provided guidance indicating that it expects revenue from its IT services segment to range between $2,600 million and $2,652 million. This forecast translates to a sequential growth guidance of -1.0% to +1.0% in constant currency terms.
Brokerages on Wipro
Nomura on Wipro
Nomura has reiterated a “Buy” rating on Wipro with a target price of Rs 600, according to their latest report. The report notes that while Q1 revenue was below expectations, the margins were in line with estimates.
The brokerage also added there are early signs of recovery in discretionary demand; however, the guidance for Q2FY25 is weaker than anticipated. Despite the weak growth outlook, Nomura maintains a robust expectation for margins.
Motilal Oswal on Wipro
Following Wipro’s Q1 results, Motilal Oswal has reduced its FY25E EPS estimate by 1% while keeping the FY26E EPS broadly unchanged. The firm has reiterated its “Neutral” rating on Wipro, considering the current valuation to be fair. The target price of Rs 500 implies a 20x multiple on FY26E EPS.
Motilal Oswal’s report on Wipro projects a modest FY24-26E IT services revenue compound annual growth rate (CAGR) of 1.4%. The report anticipates Wipro will achieve an operating margin of approximately 16% in FY25, translating into an 8.0% CAGR in INR PAT over FY24-26.
Citi on Wipro
Citi has maintained a “Sell” rating on Wipro with a target price of Rs 495, according to their latest report. The report highlights that Wipro’s weak performance in Q1, with a 1% quarter-on-quarter decline, contrasts with the 2-3% quarter-on-quarter growth reported by TCS and Infosys.
Citi also notes that Wipro’s guidance for Q2, projecting a revenue decline of -1% to +1% quarter-on-quarter in constant currency terms, is likely to disappoint given the raised expectations.
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