This IT Stock Has Potential To Give Very Good Returns

Broking firm, Geojit has placed a "buy" call on the stock of IT major Wipro, with an upside potential of nearly 15 per cent from current levels of Rs 339.

Wipro is one of the leading information technology, consulting and business process services company. The company had a dedicated work force of over 180,000 serving clients across 6 continents.

"Revenue rose 1.4% quarter on quarter, on account of improving business sentiment across the segments. BFSI, Communication and Consumer Business Unit (CBU) stood out as the top 3 key contributors to revenue this quarter.

Various cost rationalization efforts (including costs reduction and higher utilization) were taken to drive margins in long-run. Impact of COVID-19 will continue to affect a few sectors, while sectors like Energy,Natural gas and Utility (ENU) are expected to return to growth trajectory in coming quarters. Given positive performance path and improving growth aspects, we upgrade our rating to BUY on the stock with a revised target price of Rs. 383 based on 19x FY22E EPS," the broking firm has stated.

According to brokerage firm, Geojit the order book pipeline remains robust, with the intensity of sales expected to rise thereby reflecting a good business momentum.

"With the new CEO's Client-focused approach, the firm might bag sufficient orders to meet revenue expectations for the next quarter. Given trustworthy performance and increasing growth/operational efficiencies, we have a positive outlook on the stock," the broking firm has noted.

Margins at Wipro see an improvement

The Earnings Before Interest and Tax for Wipro recorded an up tick of 5.2% YoY at Rs. 2,814 crores with a margin expansion of 94bps to 18.6% in Q2FY21.

This was partially offset by the impact of rupee appreciation (60bps). Margins improved due to lower G&A expenses, higher utilization, Geojit has noted.

"Voluntary Attrition has reduced to 11.0% with improved utilization (76.4%). The company managed to generate cash accounting to 160.7% of Net income. As a result, at the end of Q2FY21,the net cash amounted to USD 4.6 bn," the broking firm has stated.

Wirpo recently announced a buyback of shares. The stock of the IT major closed at Rs 339 on the National Stock Exchange.

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