Wipro Ltd shares fell more than 6% to a 52-week low of 383 on the BSE in early trade on Thursday after the IT services major announced a 9% dip in its September quarter net profit to 2,659 crores, dragged down by increased employee expenditures and reduced non-US profits.

The Bengaluru-based company’s income from operations was 22,539 crores, a 14.6% increase over the previous year’s figure of 19,667 crores. Wipro’s December quarter revenue projection is $2,811 million to $2,853 million from its IT services division. This amounts to 0.5% to 2% consecutive growth.

The company reduced its EPS expectations for FY23 and FY24 by 6% and 2%, respectively, to reflect missed growth and elevated risk. Motilal Oswal, a local brokerage and research company, wrote in a note,

“We retain our Neutral stance since we consider the present value is fair.”

The business kept its Neutral rating on Wipro shares, with a target price of 380, as it waits for more evidence of the implementation of Wipro’s new strategy and a successful recovery from the company’s growth difficulties during the past ten years before turning more positive on the IT stock.

“Wipro reported a mediocre second-quarter result. Both sales growth and margins were weak, although in line with forecasts. The sales growth forecast for the third quarter was disappointing. With two months of pay rise impact still to come (in Q3), the firm would be unable to produce margins much above its projected level of 15% “PhillipCapital said

Wipro’s margins have declined by over 600 basis points over the previous eight quarters, owing mostly to acquisitions such as Capco and Rising, which have resulted in a significant reset of gross margin levels.

These acquisitions have also used up a lot of cash, ruling out any buybacks in the foreseeable future. All of this has not resulted in any major outperformance on the growth front, as Wipro is expected to record below industry average growth in FY23.

“Overall, it does not show any trigger in Wipro stock that would lead to its revaluation following the significant decline (CYTD, -43%).” “The stock’s downside potential is limited by its low valuations and strong dividend yield,” according to the paper. With a target price of 390, the brokerage has maintained its Neutral rating on the stock.

The Company:

An Indian multinational organization called Wipro Limited offers business process, consultancy, and information technology services. It was earlier known as Western India Palm Refined Oils Limited.

Featured Image Credit