"The company's growth strategy revolves around focusing on select segments - be it verticals, clients, geographies or services. It has shortlisted 138 clients, with a potential to grow to USD50m+, as its growth drivers. Wipro will also seek to grow by gaining market share amidst the churn happening among vendors"
The research report of Motilal Oswal said that, Wipro's organization restructuring in terms of workforce realignment is complete, but alignment of capabilities is still underway.
Spends from Investment Banking are expected to remain under pressure for another couple of quarters. Spends on Technology Services account for 8-9% of revenue in Investment Banking, v/s 6-7% in Retail Banking and 3-4% in Insurance, further added.
The company won three large deals in BFSI last year - one USD400m+, one USD200m+, and one USD100m+. In BFSI, Wipro's delivery team is 30,000+ strong and it has 2,500+ industry experts in advisory
Pharma is going through a "patent cliff". The industry lost USD234b in revenue last year, with a number of patents expiring, and is expected to lose more revenue in the next couple of years. The share of revenue from BRIC nations has gone up from 10% few years ago to 18-25% today, Motilal Oswal stated.
We expect Wipro to grow its revenue at a CAGR of 15.3% and EPS at a CAGR of 16% over FY12-14. The stock trades at 15.5x FY13E earnings. Valuations may be tested in the near term on a high ask rate to meet the mid-point of Nasscom's guidance.
However, valuations at 15x FY13E earnings imply a price of ~INR390, which we see as the bottom for the stock. We believe risk-reward is favorable at Wipro on multiple levers to drive efficiency and growth. Maintain Buy, with a price target of INR490, the research report said.