Maintain 'buy' on Wipro – TP Rs.450 - Geojit BNP Paribas

- Buy rating on Wipro has been maintained with a target price of Rs.450.

- 3QFY13 USD services revenue up 2.4% qoq, which was slightly better than market estimates.

- IT services EBIT margin was up 16 bps as productivity gains and forex gains offset lower utilization and promotion costs.

- This and higher other income led to an EPS beat.

- 4QFY13 services growth guidance of 0.5 – 3.00% qoq looks unexciting but does not derail the growth prospects.

- Volumes declined 1% qoq but offshore – onsite realizations grew 3.0 – 3.2% qoq, continuing the trend of productivity gains in fixed price contracts that started last year.

- The company had noted that its pipeline had expanded 1.7 times since 3QFY12 and pointed out improved deal closures and a perceptible change in client sentiment over the past quarter.

- Analysts are not overly worried about Wipro's poor volumes as 3Q is seasonally weak and peers also saw a drop in volume growth.

- It seems that 4Q guidance factors in macro headwinds like US debt ceiling etc, delays in some project starts and about 20 tail accounts that Wipro plans to de-emphasise.

- It is expected that USD revenue growth to pick up to 12.9% in FY14 from 5.6% in FY13.

- Positives in 3Q: the top 10 accounts continued to grow ahead of the company's average on sales investments; realization was up 4-5% yoy; and attrition was much lower yoy at 14.2% vs 19%.

- Medium term, more upsides are expected in Wipro's margins when the growth picks up.

Source : Equity Bulls

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