Mumbai: Shares of Wipro Ltd on Thursday fell 7%, the maximum in three years, as brokerage firms downgraded the stock after the company reported weaker-than-expected March quarter (Q4) results.
Wipro closed at 559.20 on BSE, down 7.01%, falling most since 22 April 2013. Intraday, the stock touched a low of 556.55 apiece, a level last seen on 11 April, falling as much as 7.45%, the most since 25 July 2014. So far this year, the Wipro stock fell 0.11%.
Wipro added incremental revenue of $264.7 million in the year ended 31 March, lower than the $463 million in the previous year and much lower than what Tata Consultancy Services Ltd (TCS) and Infosys Ltd have reported. Wipro reported 2.4% growth in revenue (dollar terms) in the quarter ended 31 March. For the fiscal year, the company’s revenue grew 7.6% in constant currency terms, Mint reported.
The management expects sequential revenue growth between 1% and 3% in constant currency terms in the April-June period of the current fiscal year, a marked improvement from the year-ago period when the firm forecast no growth in business, the report added.
Brokerage firms, including Credit Suisse, Morgan Stanley, Nirmal Bang, Kotak Institutional Equities, PhillipeCapital and Ambit Capital have downgraded the stock.
Credit Suisse has downgraded the stock to “Neutral" from “Outperform" and kept its target price at 650 a share, Morgan Stanley has downgraded it to “Underweight" from “Equal Weight" and cut its target price to 516 from 566 earlier, while Nirmal Bang has maintained its “Sell" rating on the stock and cut its target price by 19% to 489. PhillipeCapital has maintained its “Sell" rating on the stock and has kept its target price at 500 a share, while Ambit Capital has maintained “Sell" rating with target price of 550.
“The problems of poor portfolio mix, e.g. high exposure to project-based work even in infrastructure management services and higher exposure to energy clients are hard to fix quickly. Also, our recent primary checks with industry stakeholders indicate that there are permanent problems in Wipro’s culture that could prevent a turnaround. We have trimmed our FY17-18 earnings estimates by 2-3% after this result", Ambit Capital said in a report.
“We expect muted organic US$ revenue growth rate of 5% in FY2017E. We cut FY2017-18E EBIT (earning before interest and taxes) estimate by 4-7% and EPS (earnings per share) by 1-3%. Valuations may appear inexpensive but justified for consistent growth underperformance. We maintain ‘reduce’ rating; target price increases to 560 (550 earlier) due to rollover, valuing the stock at 13X FY2018E earnings. While our net profit estimates decline by 4% for the next two years, our EPS estimate decline is restricted due to buyback of shares announced by the company," said Kotak Institutional Equities, in a report to its investors.
Of the analysts covering the stock, 18 have a “buy" rating, 24 have a “hold" rating, while 12 have a “sell" rating, shows Bloomberg data.