Wipro Q2 Revenue, Guidance Disappoint Analysts But Some Raise Target Price

Despite Wipro's second quarter net profit beating analysts' expectations, brokerage firms are unimpressed by the company's financials. Analysts noted that the Indian IT bellwether's revenue growth lagged its peers, while the company's December quarter guidance failed to meet expectations.

The IT firm posted a 6.2% sequential rise in its net profit to Rs 3,227 crore in the second quarter of fiscal 2025, which is higher than the consensus estimate of Rs 3,009 crore tracked by Bloomberg. The company has cut its revenue guidance for the next quarter to (-) 2.0% to 0.0% in constant currency terms.

Most brokerages have kept the rating for the stock unchanged and some have raised their target prices citing large deal execution.

A Bernstein report said that Wipro's third quarter guidance was underwhelming, with revenue growth lagging peers and limited visibility of catch-up. Therefore, it has maintained its 'underperform' rating.

However, it raised the target price to Rs 460 per share, compared to Rs 410 apiece earlier, implying a 13% downside. "The company executed well on margins at 16.8%," Bernstein noted as it raised its EPS estimates for fiscals 2025 and 2026 by 5.3% and 1.5%, respectively.

On similar lines, Morgan Stanley expects growth gap for Wipro, compared to peers to remain wide in fiscal 2025.

It noted that the company cited continuing portfolio specific challenges in manufacturing and ENU verticals, especially in Europe, to be dragging growth performance of the company. "We believe Wipro may need better industry tailwinds to be able to narrow revenue growth gap vs peers, although execution in large deals is notably positive," it said.

Morgan Stanley has 'underweight' rating for the stock and target of Rs 500 per share, implying 5.4% downside.

"We do see some positives in the results and note the absolute downside support due to high FCF yield," the brokerage said.

Kotak Securities has raised its target price to Rs 500 from Rs 460 earlier, but has maintained its 'sell' call. "Wipro has been a consistent underperformer in the past, with several failed turnaround attempts," it said. "The current attempt has begun on a reasonable note amid demand headwinds and senior management attrition."

The brokerage values the stock at 18 times multiple, incorporating the margin of safety approach. "Valuations are inexpensive but justified given subpar performance and risks in turnaround efforts," it said. "We expect a more prudent capital allocation going forward, a positive. "

Macquarie, however, is positive on the stock as it maintains its 'outperform' call. It liked the growth in several segments of the company including BFSI, technology and communications as well as growth in the Americas.

Large deal total contract value at $1.5 billion with 19 deal wins was the highest amount won in a quarter since the first quarter of fiscal 2021, it noted. However it said, "We would have hoped for better revenue guidance in 30, given the strong deal wins, but management suggested this is largely due to furloughs."

Revenue growth from Europe and energy and utilities could also have been better, according to the brokerage.

It continues to expect improvement in growth, helped both by Wipro's continued competitiveness, as well as a pickup in demand over current year.