Shares of Wipro fell as much as 3 per cent to Rs 335.45 apiece on BSE in the early trade on Monday, as brokerages appeared unimpressed by the IT firm's third quarter results.
Although, it posted a healthy 30 per cent year-on-year (YoY) growth in its net profit at Rs 2,050 crore and 7 per cent YoY revenue growth in constant currency (CC) terms, the numbers were below most brokerages' estimates.
This apart, macro uncertainty coupled with large buyback announcement are seen as key risks to the company's growth. They also maintained that despite posting decent numbers, the company continues to underperform other top tier IT services companies.
According to news reports, global brokerage firm CLSA has maintained 'Sell' rating on the stock citing lack of convincing growth acceleration but hiked target price to Rs 295 from Rs 285, earlier. It also hiked earnings per share (EPS) estimates for FY19-21 by 4-6 per cent.
The company announced its Q3 results on Friday post market hours where it also approved an issue of bonus shares offering one bonus share for every three held by shareholders. It also declared an interim dividend of Re 1 per equity share.
"It is yet another quarter of solid execution. Our performance in both revenue and margins has been robust," Wipro CEO and executive director Abidali Z Neemuchwala said. In the constant currency terms, the IT services grew by 2.4 per cent which is above the midpoint of the guidance range, he said. Amongst the business units, BFSI, CBU and ENU continued to build on the momentum and have grown well during the quarter, Neemuchwala said.
While there was no change in demand trends, Wipro's guidance factors potential impact from the ongoing macro uncertainties in the US and Europe, observe analysts at Motilal Oswal Financial Services (MOFSL).
"Third quarter was the second consecutive quarter of a smart recovery in profitability and broad-based sequential growth. While revenues were in line, the outperformance on margins and the commentary on its outlook drive 30-50bp upgrade to our FY20/21E EBIT margin (overall)," they said. The brokerage was maintained 'neutral' rating on the stock with the target price of Rs 385.
At 10:20 am, the stock was trading nearly 2.50 per cent down at Rs 337.70 apiece on BSE. In comparison, the benchmark S&P BSE Sensex was trading 275 points or 0.76 per cent higher at 36,661.35.