Wipro hits new high, rallies 8% on strong revenue growth in Sept quarter

Motilal Oswal maintains a 'Neutral' stance on the stock and awaits further evidence of execution of Wipro's refreshed strategy, & successful turnaround from its growth struggles over the last decade

Shares of Wipro hit a new high of Rs 723.65 on the BSE on Thursday after they rallied 8 per cent in the intra-day trade on the back of a strong 8.1 per cent quarter on quarter (QoQ) revenue growth in IT Services in the July-September quarter (Q2FY22). The stock surpassed its previous high of Rs 698.95 touched on September 24, 2021.

In rupee terms, the technology services firm's consolidated revenue grew 7.7 sequentially at Rs 19,667 crore. However, its profit fell 9.6 per cent QoQ at Rs 2,931 crore because of higher amortisation cost on the Capco acquisition and salary hikes. According to Bloomberg estimates, analysts, on average, expected Wipro to post revenue of Rs 19,363.4 crore and profit of Rs 2,875 crore.

In the current quarter (Q3FY22), the technology services firm expects revenue from its IT services business to be in the range of $2.63 billion- $2.68 billion, translating to a sequential growth of 2-4 per cent.

"We see the guidance as positive, given the supply constraints and seasonality, but remain watchful on margin as the company continues to operate ahead of its guidance of 17-17.5 per cent," Motilal Oswal Financial Services (MOFSL) said in a result update.

"In the past few years, Wipro has underperformed Tier I companies on growth due to its higher exposure to challenged verticals (such as Healthcare and ENU). Changes at the company level (restructuring in India/Middle East) have further constrained growth. We expect the refreshed strategy of the new management to make the organization leaner. Its growth-focused and client-centric approach would aid growth over the medium-to-long term," the brokerage firm said.

MOFSL maintains a 'Neutral' stance on the stock and awaits further evidence of execution of Wipro’s refreshed strategy, and successful turnaround from its growth struggles over the last decade before turning more constructive on the stock.

Those at ICICI Securities, meanwhile, said: The company growth guidance for Q3 is adjusted for furloughs and is largely in the historical growth rates for the quarter. The demand environment is strong and the company continued to increase the fresher’s hiring to cater demand, which is expected to support margins in the medium term. Its recent acquisition (Capco) will further strengthen its position in the BFSI space.