Wipro - Consulting Exposure, Muted Expectation Offer Potential Recovery Play: Motilal Oswal

Motilal Oswal Report

Wipro Ltd. had undergone structural changes while overhauling its key leadership team and making bold investments to acquire inorganic capabilities. We expect the revenue conversion to improve once the macro challenges recede and enterprises resume their discretionary IT spends.

It is doubling down its effort to improve margins. Despite witnessing some recovery following the inorganic investments, the company is committed to putting further efforts toward a complete turnaround, specifically aiming to enhance the margin profile of the acquired entities.

We expect an FY24E/FY25E USD revenue decline of -4.4%/+7.3% constant currency YoY with FY24E/FY25E IT service margin at 15.7%/17.0% (versus the guided range of 17%- 17.5%).

We believe that the current valuation of 18 times FY25E earnings per share is relatively inexpensive and can improve once the macroeconomic environment improves. We keep a close watch on macro recovery and the discretionary spends before we turn positive on the name.

We reiterate our 'Neutral rating on the stock with a target price of Rs 460 (premised on 20 times FY25E EPS).

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