Accumulate Wipro - Kotak

Wipro reiterated its cautious stance on the macro scene at its analyst meet held yesterday. While the management indicated comfort with respect to the CY12 budgets and increase in off-shoring / outsourcing, it also accepted that, the pick-up in decision-making had not been along expected lines. Discretionary spends are under stress in some sectors and sub-sectors like the Investment Banking unit under BFSI. Wipro's restructuring is almost complete and the company is focusing on areas like Cloud, mobility and analytics along with building industry-leading competencies in several subsegments to differentiate itself. The company has made several changes during the organization restructuring exercise to focus on more efficiency and business acquisition, which should deliver results, once demand improves.

We fine-tune our earnings estimates to account for the changed currency scenario. EPS estimates are up marginally to Rs.26.5 (Rs.26 earlier). The price target correspondingly goes up to Rs.425 (Rs.421 earlier). We maintain ACCUMULATE rating.

We prefer TCS and Infosys over Wipro. Our exit multiple for Wipro is at a discount to TCS and equal to Infosys. Higher success in driving incremental growth from large accounts, stability in average realisations and sustained higher margins may make us more positive on the company. A sharp appreciation in the INR and a slower-thananticipated recovery in user economies pose downside risks to our estimates.

Source : Equity Bulls

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