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Wipro
Outlook
The three key reasons behind our conviction are a) rising customer satisfaction with
Wipro’s service quality after the organization restructuring, (b) the appreciable fall in
attrition not only at the overall company level but also at individual projects and (c) bold
inorganic initiatives to consolidate position with large clients. Moreover, with best-inpack
forecast earnings of 21% over FY12-14E, Wipro trades at relatively inexpensive
valuation of 14x FY13E (18% discount to TCS. Based on improving business traction
and attractive valuations, we rate the shares Buy.
Valuation
We value Indian IT services firms on a P/E basis relative to their historical trading range,
compared with peers as well as growth rates. Our 12-month target price is based on
19x FY13E P/E (vs 15x earlier) and is now valued at a slight premium to Infosys' target
P/E multiple. Wipro is likely to report earnings CAGR of 21% over FY12-14E. We value
Wipro at a premium to Infosys given its better near-term growth. We believe our target
P/E is well supported by its earnings CAGR of 21% over FY12-14E.
Risks
We identify four industry-level risks: (1) rupee appreciation, (2) a protracted global
economic slowdown, (3) aggressive steps by global vendors to adopt the offshore
model leading to competition for clients as well as for employees and (4) increasing
wage inflation with supply side (employees) issues. For Wipro, the key risks remain that
of beefing up its enterprise IT (especially BFSI) portfolio, executing well on the
turnaround of the BPO business and integrating its various acquisitions.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Wipro
Outlook
The three key reasons behind our conviction are a) rising customer satisfaction with
Wipro’s service quality after the organization restructuring, (b) the appreciable fall in
attrition not only at the overall company level but also at individual projects and (c) bold
inorganic initiatives to consolidate position with large clients. Moreover, with best-inpack
forecast earnings of 21% over FY12-14E, Wipro trades at relatively inexpensive
valuation of 14x FY13E (18% discount to TCS. Based on improving business traction
and attractive valuations, we rate the shares Buy.
Valuation
We value Indian IT services firms on a P/E basis relative to their historical trading range,
compared with peers as well as growth rates. Our 12-month target price is based on
19x FY13E P/E (vs 15x earlier) and is now valued at a slight premium to Infosys' target
P/E multiple. Wipro is likely to report earnings CAGR of 21% over FY12-14E. We value
Wipro at a premium to Infosys given its better near-term growth. We believe our target
P/E is well supported by its earnings CAGR of 21% over FY12-14E.
Risks
We identify four industry-level risks: (1) rupee appreciation, (2) a protracted global
economic slowdown, (3) aggressive steps by global vendors to adopt the offshore
model leading to competition for clients as well as for employees and (4) increasing
wage inflation with supply side (employees) issues. For Wipro, the key risks remain that
of beefing up its enterprise IT (especially BFSI) portfolio, executing well on the
turnaround of the BPO business and integrating its various acquisitions.
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