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Wipro
Organisational restructuring – a step in the right direction. As nearterm
uncertainty settles and assuming there are no exits in the
top/middle management, top-line growth should accelerate in FY12
Vertical focus to improve Wipro’s prospects to win mega deals
We remain Neutral with a TP of INR555. Low downside risk -
stock at a c10% discount to Infosys and factors in c6% lower topline
growth in FY12.
Wipro has been a laggard in the recent recovery.
The company saw slower top-line growth
compared to peers. The two CEOs were therefore
replaced in January this year with Wipro veteran
Mr T K Kurien. We believe that while this step is
in a positive direction, as this will simplify the
management structure and help the company
successfully bid for mega deals, near-term
uncertainty and disruption could not be ruled out.
Furthermore, the re-organisation benefits might
reflect in the financials with a lag of 2-3 quarters
and in the mean time stock is likely to remain
range-bound. We therefore wait for more certainty
and stability through the management ranks
before getting more assertive on the stock.
Valuations
The stock is currently trading at a PE of c18x on
our FY12e EPS. We continue to value Wipro at a
10% discount to Infosys, at 20x, on our CY12e
EPS, valuing the company at INR 555. We remain
Neutral (V) on Wipro.
Risks
Upside risks: quicker improvement in deal wins post
the management change is the primary upside risk.
On the downside, higher wage inflation and slower
recovery in the volume growth are the key risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Wipro
Organisational restructuring – a step in the right direction. As nearterm
uncertainty settles and assuming there are no exits in the
top/middle management, top-line growth should accelerate in FY12
Vertical focus to improve Wipro’s prospects to win mega deals
We remain Neutral with a TP of INR555. Low downside risk -
stock at a c10% discount to Infosys and factors in c6% lower topline
growth in FY12.
Wipro has been a laggard in the recent recovery.
The company saw slower top-line growth
compared to peers. The two CEOs were therefore
replaced in January this year with Wipro veteran
Mr T K Kurien. We believe that while this step is
in a positive direction, as this will simplify the
management structure and help the company
successfully bid for mega deals, near-term
uncertainty and disruption could not be ruled out.
Furthermore, the re-organisation benefits might
reflect in the financials with a lag of 2-3 quarters
and in the mean time stock is likely to remain
range-bound. We therefore wait for more certainty
and stability through the management ranks
before getting more assertive on the stock.
Valuations
The stock is currently trading at a PE of c18x on
our FY12e EPS. We continue to value Wipro at a
10% discount to Infosys, at 20x, on our CY12e
EPS, valuing the company at INR 555. We remain
Neutral (V) on Wipro.
Risks
Upside risks: quicker improvement in deal wins post
the management change is the primary upside risk.
On the downside, higher wage inflation and slower
recovery in the volume growth are the key risks.
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