Tech giant, Wipro's share price skyrocketed by more than 5% on Friday, October 17, after the company beat estimates in Q2FY25 earnings. Also, Wipro has announced a big bonus reward for investors. The stock is inching closer to its 52-week high of Rs 580 apiece on BSE. Although Wipro's FY25 guidance was below expectations, the operating performance improved broadly in the quarter. Motilal Oswal is Neutral on the stock.
Wipro Share Price:
At the time of writing, Wipro's share price traded at Rs 553.90 apiece, up by 4.75% on BSE, with a market cap of Rs 2,89,901.05 crore.
In the opening bell, the stock rallied by as much as 5.34% to hit an intraday high of Rs 557.05 apiece, which was near its 52-week high of Rs 580 apiece.
Wipro's return on equity is strong at 15.41%%.
Why Wipro Share Prices Are Rising Today?
According to Motilal Oswal, Wipro had a strong quarter with healthy revenue growth and robust deal momentum. The company continued to secure large deals in 2Q, with the total contract value (TCV) up 8% QoQ. WPRO's deal pipeline is also strong, particularly in the BFSI sector, which is witnessing a pickup in discretionary spending.
While Emkay Global pointed out that in Q2FY25, the company's operating performance was upbeat, while it witnessed broad-based growth recovery, and strength in top clients (3.9% QoQ). It added, "Revenue in line with expectations while overall margins and IT Services EBITM above our estimates."
The latest rally is attributed to its upbeat performance, especially compared to peers like Infosys, TCS, and HCL Tech.
In Q2FY25, Wipro beats estimates by earning a consolidated net profit of Rs 3,209 crore (attributable to owners), registering a growth of a whopping 21.25% year-on-year and 6.85% quarter-on-quarter.
In dollar terms, the company's IT services segment revenue was at $2,660.1 million, an increase of 1.3% QoQ and a decrease of 2.0% YoY. While non-GAAP constant currency IT Services segment revenue increased 0.6% QoQ and decreased 2.3% YoY.
Time To BUY Wipro Shares?
Despite the latest bullish trend, brokerages are warranting cautiousness.
Motilal in its note said, "There are areas of concern that warrant cautiousness. The guidance for 3QFY25 is muted (-2% to 0% in CC) due to furloughs and softness in key regions, particularly in Europe."
Additionally, it added that sectors like manufacturing and energy remain soft, with signs of a potential revival but no immediate turnaround making these verticals more of a long-term play.
For the quarter ending December 31, 2024 period (Q3FY25), Wipro expects its revenue growth in the IT Services business segment to be in the range of $2,607 million to $2,660 million. This translates to sequential guidance of (-) 2.0% to 0.0% in constant currency terms. In the previous quarter, the FY25 revenue guidance was around -1% to 1%.
Also, Motilal stated that going ahead, Wipro is confident of maintaining margins within the narrow range of 17-17.5%. Despite partial wage hike headwinds in 3Q, there are margin tailwinds, including improving employee utilization (which dipped slightly in 2Q but remains a lever for future quarters), increasing offshoring, and fixed-cost projects.
On the valuation, Motilal Oswal said, "We expect the company to deliver FY24-27E IT Services revenue CAGR of 3.0%. We expect WPRO to clock ~16% operating margin in FY25, which should translate into a 7.2% CAGR in INR PAT over FY24-27."
Adding, Motilal concluded, "We have raised our FY25E EPS by ~2% to factor in the margin beat and kept FY26/FY27E EPS broadly unchanged after its 2Q print. We reiterate our Neutral rating as we view the current valuation as fair. Our TP of INR500 implies 20x Sep'26E EPS."
Wipro Bonus Issue:
The company announced the issuance of bonus equity shares in the proportion of 1:1. This means that for every 1 (One) fully paid-up equity share held and a bonus issue [stock dividend on American Depositary Share (ADS)] of 1 (One) ADS for every 1 (One) ADS held, as on the record date, as per the filing.
The record date for reckoning eligible shareholders (including ADS holders) entitled to receive bonus shares will be communicated later. However, Wipro has announced that it will complete bonus share action on or before December 15, 2024, two months from now.
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