Wipro share price hits 52-week high after Q1 earnings; should you buy, sell or hold?

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Wipro reported 12% QoQ constant currency (CC) revenue growth in Q122, well above its guidance and our estimate, led by stronger-than-expected growth from both the Capco acquisition and organic business, CLSA said.

Wipro share price hits 52-week high after Q1 earnings; should you buy, sell or hold?
The share price of Wipro hit a 52-week high of Rs 589 on the BSE in early trade on Friday after the company posted a nine percent sequential rise in its consolidated net profit at Rs 3,242.6 crore for Q1FY22.
The company's IT services segment revenue rose 12.45 percent to Rs 18,368.4 crore as compared to Rs 16,334 crore, QoQ.
In dollar terms, the company’s revenue was at $2,414.5 million, registering a growth of 12.2 percent as against $2,152.5 million, sequentially. Constant currency (CC) revenue growth was at 12 percent.
Wipro now expects Q2FY22 IT services business revenue in the range of $2,535-2,583 million, which translates to a sequential growth of five percent to seven percent.
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Here’s what brokerages have to say about Wipro’s Q1 earnings and the stock:
CLSA
Wipro reported 12% QoQ constant currency (CC) revenue growth in 1Q22, well above its guidance and our estimate, led by stronger-than-expected growth from both the Capco acquisition and organic business, CLSA said.
However, this is likely to normalise as the 5-7% QoQ revenue growth guidance for 2Q22 implies 1.8%-3.8% organic growth. Thus, while we like the aggressive stance of the new management, we remain cautious given multiple moving parts (acquisitions and large deals) that limit extrapolation, along with the stock’s elevated valuation, it added.
CLSA maintained ‘underperform’ rating and raised the target price to Rs 560 per share from Rs 540 earlier.
Citi
Citi believes that Wipro’s Q1 revenue and guidance surprised, while margin, attrition trend, and TCV were weak. Growth was a combination of 4.9 percent QoQ organic growth and significantly better numbers at Capco.
Our new estimates for revenue growth are 27 percent/11 percent for FY22/23; EPS growth of 15 percent/6 percent. We raise target multiple to 28x from 26x for FY23, Citi said.
The brokerage has maintained a ‘buy’ rating and raised the target price to Rs 655 per share from Rs 615 earlier.
Morgan Stanley
Execution on revenue growth has improved meaningfully. Positive surprise drives higher EPS estimates. Consistent strong execution will be needed before multiples match the peer group, the brokerage said.
It maintained an ‘underweight’ call and raised the target price to Rs 560 from Rs 520.
UBS
The stock should see some upgrade to consensus earnings. However, the recent run in the stock could cap near-term upsides. Lower TCV addition could cause some concern, UBS said.
It has a ‘neutral’ rating on the stock with a target price of Rs 470 per share.
ICICI Direct
We see a downside risk given the impending wage hikes, supply-related cost pressures, and planned investments. Even as incipient signs of a turnaround are encouraging, we await further evidence of sustainable execution on this front, ICICI Direct said.
Current valuations (24x FY23E EPS) more than price-in a turnaround. As we see higher scope for incremental disappointments v/s surprises, we retain our ‘sell' rating, it added. The brokerage revised the target price to Rs 485 from Rs 365 earlier.
Yes Securities
While some of the margin pressure would be managed through an improved employee pyramid and other productivity measures, but the risks to margin remain. Organic revenue growth for FY22 would be double-digit led by robust deal wins, Yes Securities said.
The valuation remains stretched as its trades at 22x on FY23 earnings, it added. The brokerage maintained ‘add’ on the stock and revised the target price to Rs 625 from Rs 600 earlier.
At 10:00 am, the shares of Wipro were trading 0.17 percent higher at Rs 576.70 on the BSE.
(Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)

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