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Wipro shares climb 3% post Q2 earnings; should you buy?

Brokerages came out with mixed reviews of Wipro’s September quarter earnings, after the IT major posted a 35 per cent year-on-year (YoY) rise in consolidated net profit for the quarter at Rs 2,552.7 crore.

The company had posted Rs 1,889 crore profit for the year-ago period. Its total income for the quarter stood at Rs 15,875.4 crore against Rs 15,203.2 crore reported for the year-ago period.

“Wipro delivered below-par performance for Q2FY20 with IT revenue rising 0.5 per cent QoQ to $2.04 billion against our estimate of $2.06 billion,” Reliance Securities said.

It expects Wipro to witness single-digit revenue growth for the eighth year in a row. “Muted BFSI outlook, budget delays, increasingly challenging retail vertical and continuing volatility in India COMM business could weigh on revenue growth. There may be limited opportunities for effective margin management through improved operating efficiency. We maintain a ‘hold’ recommendation on the stock with a revised target price of Rs 270 (from Rs 260 earlier),” the brokerage said.

Emkay Global Financial Services maintained a ‘sell’ call on Wipro with a price target of Rs 235. “Wipro reported in-line numbers for September quarter, with 1.1 per cent QoQ growth in constant currency terms and an overall EBIT margin of 17.6 per cent (up 50bps QoQ). The relatively weak growth was largely due to a decline in top client (financial services), which fell around 13 per cent QoQ in US dollar terms,” Emkay said.

The Bengaluru-based company's revenue came in 4 per cent higher year-on-year at Rs 1,51,25.6 crore. Wipro has guided for 0.8-2.8 per cent sequential growth in IT service revenue at $2,065-2,106 million for December quarter.

Motilal Oswal Financial Services maintained a ‘neutral’ view on Wipro with a price target of Rs 260.

“Our CC revenue estimates for FY19-21 have moderated by 0.4-1.1 per cent. We do not make any meaningful revisions to margin estimates. However, our FY20 EPS estimate is upgraded by around 3 per cent due to the lower ETR expectation. Wipro’s overall growth continues lagging peers, given company-specific execution challenges. We do not see any material headroom for a re-rating of current valuation multiples,” it said.

The shares of the company closed 2.11 per cent higher at Rs 248.85 on BSE.
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