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Wipro also acquired a minority stake in consumer products firm Happily Unmarried Marketing Pvt. Ltd for its Ustraa personal care products range. (Mint)
Wipro also acquired a minority stake in consumer products firm Happily Unmarried Marketing Pvt. Ltd for its Ustraa personal care products range. (Mint)

Wipro shares tumble over 6%, analysts recommend 'add' for further gains

HDFC Securities has set the target price at 470 per share of Wipro.

Shares of Wipro on Thursday declined over 6% as investors booked profits at higher levels. The stock after opening on a weak note, further tumbled 6 % to 431 as the trade progressed on the BSE. At the NSE, it plunged 6.31% to 430. IT services major Wipro on Wednesday posted nearly 21% jump in consolidated net profit at 2,968 crore for the December 2020 quarter, and said the demand environment is improving steadily.

The net profit attributable to shareholders in the year-ago period was at 2,455.9 crore, Wipro said in a regulatory filing. Brokerages maintain a positive outlook and recommend to add the stock for further gains.

"We maintain ADD on Wipro, following a strong revenue performance (the best in nine years) and better-than-expected margin performance. Revenue growth of 3.4% QoQ CC was broad-based and 4Q growth guidance of +1.5- 3.5% indicates continued growth momentum. The deal pipeline remains strong and the company won 12 deals of TCV greater than USD 30mn," says HDFC Securities.

The brokerage says, that Wipro under the new structure will be more agile and will focus on accelerating growth, supported by large deal wins, leveraging partner ecosystem, and higher investments in talent. Key positives include (1) strong guidance, (2) pick-up in deal wins, (3) robust cash generation (OCF of ~149% of net income), and, (4) 246bps QoQ improvement in IT services margin.

HDFC Securities has set the target price at 470, based on 20x Dec-22E EPS (~20% discount to INFY). The stock is trading at 23.2/20.8x FY21/22x EPS.

Current market price of Wipro is 458 per share.

The company logged 3.9% quarter-on-quarter growth in IT services revenue, the "highest in 36 quarters".

Overall, the revenue from operations grew nearly 1.3% to 15,670 crore in the quarter ended December 2020 as compared to the corresponding period of the previous year.

"Last year, we witnessed some very unprecedented times and now with improved vaccine prospects, we are filled with optimism for 2021. We are very hopeful that it will be a better year for the society, for businesses, our clients, and for us," Wipro CEO and Managing Director Thierry Delaporte said.

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