Wipro Shares Gain Over 2% As Q4 Earnings Beat Expectations; Should You Buy, Sell Or Hold?

Wipro shares gained over 2 per cent on Monday as investors reacted to the IT services firm’s fourth-quarter results, which was better than what market analysts expected.

At around 10.50 am, shares of the company were up 2.46 per cent to Rs 464 on the Bombay Stock Exchange (BSE).

Wipro has beaten the Street estimates with a 5 per cent rise in net profit for the January-March quarter, but persisting cost-cutting measures, decline in headcount and a sluggish guidance for the next quarter fuelled concern among brokerages that a recovery for the IT major may still be some time away.

The company’s net profit rose 5 per cent on-quarter to Rs 2,835 crore in January-March, surpassing the market projection of Rs 2,748 crore, while its revenue too exceeded expectations, despite staying largely flattish on-quarter at Rs 22,208.3 crore as against the Street estimate of Rs 22,117 crore.

Operational efficiencies helped the company expand its EBIT margins by 40 basis points sequentially to 16.4 percent. Going ahead, the management has kept its revenue guidance unchanged for Q1 FY25 to -1.5 percent to 0.5 percent.

It is this sluggish growth guidance from Wipro that left brokerages like JP Morgan, Nomura, HSBC and UBS in a state of discomfiture. While Nomura believes the Q1 FY25 guidance reflects discretionary weakness, UBS sees it as a sign of revival still being afar.

Both Nomura and HSBC have maintained reduced ratings on Wipro with target prices of Rs 410 and Rs 385, respectively.

“Wipro cautioned that the revival in BFSI (+2.1% q-q) is partly due to the reversal of furloughs seen in 3Q and discretionary demand remains challenging. Despite healthy order booking, Wipro’s 1Q FY25F revenue growth guidance of -1.5% to +0.5% q-q in cc reflects our view,” Nomura said.

On the other hand, HSBC highlighted the continued market share loss of Wipro as it feels that signs of operational improvement are still not imminent. According to the brokerage, growth acceleration for Wipro also doesn’t look imminent as cost-cutting measures continue. Regardless, the brokerage is still positive over the elevation of an internal veteran to lead the company. HSBC also has a ‘reduce’ call on Wipro with a price target of Rs 385.

Morgan Stanley reduced the target price to Rs 421 saying that although the commentary suggests stabilization in the BFSI vertical, there is limited clarity on pace of recovery.

UBS also has a sell rating with a target price of Rs 430. “Management optimism in last quarter around revival in consulting on basis of Capco order book did translate into soft growth but not enough to drive overall revenue growth. Further, a weak Q1FY25 guidance indicates revival still some time away,” it said.

Based on the sluggish growth guidance, Nuvama Institutional Equities also expects Wipro to underperform peers, however, it feels its inexpensive valuation and high dividend yield limit the downside potential. Nuvama has a ‘hold’ call with a price target of Rs 460.