Wipro shares remained under pressure on Thursday after the IT firm on Wednesday reported 1.6 per cent drop in its March quarter net profit to Rs 2,235 crore due to pressure on margins even as it aims to double revenue to $15 billion by 2020. The share price of Wipro closed 7.01 per cent down at Rs 559.20 on BSE.
The company had registered a consolidated net profit of Rs 2,272 crore in the same quarter last fiscal.
Kotak Securities senior vice-president and head of private client group research Dipen Shah said the revenues matched up with expectations but margins were below our expectations.
The company board also approved a share buyback for Rs 2,500 crore. Wipro will buy up to 4 crore shares, representing 1.62 per cent of the total paid-up capital, at Rs 625 per share.
According to Sharekhan, Wipro’s management has given an ambitious target of $15 billion revenues and 23 per cent margins by 2020, but refrained from giving any timeline to track the roadmap of the improvement. The brokerage house sees the aspiration as a goal setting target of new CEO Abid Ali Neemuchwala as an uphill task looking at current growth trajectory. At the current levels, the stock trades at a reasonable valuation of 14.8x and 13.3x based on its FY2017 and FY2018 estimates, respectively, which seem to fairly valued with little upside. Thus, Sharekhan has maintained ‘Hold’ rating on the stock with a revised price target of Rs 650.
Emkay Global Financial Services in a research note said, “Wipro is our least preferred stock in the Tier I space and we do not see any change in our stance for now. We currently have a ‘Hold’ rating on Wipro with a target price of Rs 580.”
(With agency inputs)
