Wipro’s share price has appreciated close to 20% over the last one month, since the declaration of its Q1FY09 results. This up move has also seen it out-perform the sectoral index and also the broader BSE Sensex over the period.
We opine the up move came about on the back of an inline set of quarterly numbers, lack of any significant company-specific negatives and relatively attractive valuations.
We had earlier upgraded the stock to a BUY noting its cheap valuations of 13x FY09E EPS, though we had maintained our preference for Infosys.
The stock has appreciated around 20% since then and now offers a limited upside to our price target of Rs480. At current market value the stock quotes at 16.2x FY09E EPS of Rs.26.8.
The management, in previous commentaries, has re-iterated continuing traction with marginal impact of US sub-prime issue. It has also indicated flat to marginally higher client budgets and increasing traction and preference for off-shoring.
However, it also expects current uncertainties relating to budget allocations to keep near-term growth muted but expects growth to pick up in 2HFY09. We opine the same will be critical and coupled with better news on the macro-environment is necessary to lend more visibility to future earnings and also continued share price performance.
We consequently move the stock to a ACCUMULATE now, leaving our estimates and also price target unchanged at Rs480. We continue to prefer Infosys on account of its relative higher growth and IT services margins.