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Wipro shares decline 6% on weak Q4 earnings; brokerages cut target price

Wipro shares decline 6% on weak Q4 earnings; brokerages cut target price

Wipro shares decline 6% on weak Q4 earnings; brokerages cut target price
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By Ankit Gohel  Apr 16, 2020 12:46:42 PM IST (Updated)

Shares of Wipro fell over 6 percent on Thursday after the company reported a 5.3 percent sequential fall in its consolidated profit at Rs 2,326.1 crore for the quarter ended March 2020.

Shares of Wipro fell 6 percent on Thursday after the company reported a 5.3 percent sequential fall in its consolidated profit at Rs 2,326.1 crore for the quarter ended March 2020.

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The stock touched an intraday low of Rs 175.30 on the BSE. However, the stock trimmed losses later in the day and was trading  0.24 percent lower at Rs 186.10 at 11:25 am.
The company's revenue for the quarter stood at Rs 15,296 crore against Rs 15,100 crore reported in the last quarter, a rise of 1.3 percent. In dollar terms, IT services segment revenue in Q4FY20 fell 1 percent to $2,073.7 million.
As uncertainty in the external environment amid coronavirus pandemic looms large, the IT major also suspended revenue growth guidance.
The IT services operating margin for the quarter was at 17.6 percent, a decrease of 80 bps QoQ as compared to the poll prediction of 18 percent.
Among brokerages, CLSA and Jefferies reduced their target price for the stock post the results, while Morgan Stanley retained a bearish stance on the stock.
CLSA retained 'sell' rating on the stock and cut the target price to Rs 180 from Rs 235 per share as it expects the company’s revenue to be weak in Q1FY21 due to low demand. The brokerage also cut its revenue estimates by 8-9 percent and margin by 50-100 bps for FY21-22.
Meanwhile, Jefferies maintained hold call and cut target to Rs 185 from Rs 190 per share.
Morgan Stanley kept an 'underweight' call with a price target at Rs 180 per share. The research house said that COVID-19 posed significant risks to FY21, while investors would be monitoring the leadership transition in the near term. It has cut FY21/22 EPS estimates by 4.9 percent/3.6 percent.
The growth underperformance is likely to continue in the down cycle, while it has maintained hold noting undemanding valuation and significant cash on book.
Wipro’s management said the business impact from the global pandemic was felt in the last two weeks of the final quarter, but that was enough to impact revenues for Q4 by $14-$16 million (0.7-0.8% of revenues).
“We expect revenues to decline in the coming quarters and expect tremendous pressure on margins. There will be tradeoffs on hiring, discretionary spends, subcontractor costs among other things,” said Abidali Neemuchwala, CEO, Wipro.
For the full year FY20, Wipro's net profit grew 8.3 percent to Rs 9,771.8 crore, while revenue rose 4.2 percent to Rs 61,023.2 crore from FY19.
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