Wipro extends fall on disappointing Q4 results; stock nears 52-week low

Shares of Wipro declined 3 per cent to Rs 493.55, falling 5 per cent from its intra-day high of Rs 519 on the BSE, in Monday's intra-day trade after it reported a disappointing margin for March quarter (Q4FY22). 

The stock of the information technology (IT) software & consulting company was close to its 52-week low price of Rs 477.80, touched on May 4, 2021. In the past one month, it has slipped 18 per cent as compared to 4 per cent decline in the S&P BSE Sensex.

Wipro's net profit rose 3.85 per cent year-on-year (YoY), and 4 per cent sequentially, to Rs 3,087 crore in Q4FY22. Revenue for the quarter was up 28 per cent YoY at Rs 20,860 crore from the previous year's Rs 16,245 crore. In dollar terms, the company reported IT services revenue at $2.72 billion, up 3 per cent sequentially. Earnings before interest and margin (EBIT) of IT Services contracted 60bp QoQ to 17 per cent.

The company has guided for a revenue growth between 1 per cent and 3 per cent for the first quarter of FY23 or to be in the range of $2,748 million to $2,803 million. The management has also stated that based on this growth for FY23, the guidance will be 16-18 per cent.

"We see the muted topline growth guidance for 1QFY23 as disappointing, since the expectation was that Wipro's Q1 seasonality is a thing of past and it should gain from the strong demand for consulting-led IT services," Motilal Oswal Financial Services said.

Moreover, while the company's commentary on demand environment remains robust, there is a visible absence of any large deal over the past few quarters. We expect Wipro to report FY23 organic constant currency (CC) USD revenue growth towards the lower end of our Tier 1 IT services universe (MOSLe of 12.4 per cent). FY23 EBIT margin to be below its medium-term guidance band of 17.0-17.5 per cent due to elevated investments, the brokerage firm added in its result update.

The brokerage firm has lowered FY23E/24E EPS by 1.3 per cent/1.6 per cent. It has also maintained 'Neutral' rating as it awaits further evidence of the execution of Wipro's refreshed strategy, and a successful turnaround from its growth struggles over the last decade, before turning more constructive on the stock.

Technical View

Bias: Negative

Support: Rs 485

Wipro seems headed towards its major support at Rs 485-odd level, both, on the weekly and the monthly chart. As per the weekly chart, the 100-WMA (Weekly Moving Average) stands at Rs 484.80, and the trend line support on the monthly chart is at Rs 484.50. 

The stock has witnessed downward pressure since the start of the calendar year, and has shed a whopping 32 per cent during this period. In case, the support at Rs 485-odd level is held, then the stock can witness a pull back towards Rs 550-560 odd levels.

Having said that, currently the momentum is strongly in favour of the bears. The DI (Directional Index), MACD (Moving Average Convergence and Divergence) and the Slow Stohastic are all in favour of the bears. The 14-day RSI (Relative Strength Index), however, is in oversold territory. Hence, a pullback rally in the near term cannot be ruled out. 

On the flip side, break and sustained trade below Rs 485, can trigger a fall towards Rs 470-445 odd levels.
 

(With inputs from Rex Cano)