Prabhudas Lilladher is bullish on Wipro and has recommended buy rating on the stock with a target of Rs 680 in its June 10, 2014 research report.
"Wipro reported mixed-bag performance in Q4FY14. IT Services (USD) revenue grew by 2.5 percent QoQ (2.3 percent @cc) to US$1,720m (PLe: US$1,729m, Cons: US$1,725m). Overall revenue grew by 3.4 percent QoQ to Rs116.5bn (PLe: Rs116.4bn, Cons.: Rs116.4bn). Operating margins expanded by 147bps to 21.7 percent (PLe: 20.7 percent, Cons: 21 percent), strongest exit rate since FY02. EPS declined by 10.1 percent QoQ to Rs9.09 (PLe: Rs8.5, Cons: Rs8.5)."
"The management indicated that weak guidance for Q1FY15 is due to seasonality and attributed it to weakness in 'Retail' vertical (in-line with peers, a weakness in Q4FY14 spilling over Q1FY15) and usual impact due to softness in India business. Wipro tends to have softest Q1 (among peers) with growth rate differential between Q1 and Q2 ranging from 2.1-4.3 percentage point over the last five years. We expect revenue growth to accelerate in Q2FY15 to industry average. (Exhibit: 2,3) The management was more assertive than peers highlighting strongest ever deal closure, along with strongest deal-pipeline as it enters FY15. Moreover, the deal-win-rate for the company has improved by ~50 percent over the last few quarters. Client satisfaction index has doubled over the last one year. We see Wipro entering the point of inflexion wherein their client mining would improve along with strong performance from hunting team."
"We see improvement in the win rate to drive revenue momentum, along with available margin levers that would accelerate earnings momentum. We see Wipro in an early stage of re-rating cycle. We reiterate "BUY" rating, with a TP of Rs680, 16x FY16E earnings estimate," says Prabhudas Lilladher research report.
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