Wipro (WPRO IN, INR 400, Hold)
We recently attended analyst meet of Wipro where the company’s CEO, Mr. T.K. Kurien, and vertical heads of BFSI and healthcare verticals made presentations highlighting emerging trends, challenges and the company’s response to address growth potential. From the meet, we infer that BFSI continues to remain challenging, while rest of the verticals continue to face delays related to decision making. At a P/E of 13.6x FY14E, we maintain ‘HOLD’
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Macro uncertainties remain; new areas of demand emerge
Management maintained stance of volatile macro environment, especially in Europe, and clients remaining cautious in the BFSI vertical. However, newer areas like predictive analytics, cloud computing, mobility coupled with new verticals like healthcare and energy and utility are likely to drive growth for the company. Within BFSI, investment banking seems to be the worst hit. Also, demand in BFSI seems to be led by cost take out and regulatory related work in Europe, albeit at a slower rate.
Increased focus on customer centricity
Wipro intends to focus on customer satisfaction and has, accordingly, linked its training program and reward system in a manner which foster customer satisfaction. It has also linked its reward system to customer satisfaction and growth and profitability (at gross margin levels). Also, it has stated its endeavor of building products, platforms and IP based solutions which will enable it to garner higher wallet share among its clients and also act as door opener in new clients.
Outlook and valuations: Execution key; maintain ‘HOLD’
We believe Wipro’s execution of its growth strategy is key going forward. Post takeover by the new CEO, Mr. T.K. Kurien, key metrics (client metrics and attrition) have begun to improve, but the company will have to make massive efforts to regain its lost market share and accelerate growth. At CMP of INR400 the stock is trading at P/E of 13.6 our FY14E earnings. We maintain ‘HOLD’.
Regards,
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