Add This Largecap IT Stock With Rs. 475 Target Price, FY22 Net Sales Recorded At Rs. 790b: HDFC Securities

HDFC Securities, a top brokerage firm recommends investors to add the stock of Wipro, with a target price of Rs. 475 to gain high returns.

Stock To Buy: Target Price & Financials

The Current Market Price (CMP) of Wipro is Rs. 422. HDFC Securities has estimated a Target Price for the stock at Rs. 475. It is a large-cap stock with a market capitalization of around Rs. 227,655 crore. This stock has the potential to give 12.55% return, in the upcoming 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 422
Target Price	Rs. 475
Potential 1 year return	12.55%
52 week high share price	Rs. 739.85
52 week low share price	Rs. 391

Financials

The company's net sales in FY22 was recorded at Rs. 790.93 b, which is expected to be at Rs. 903.67 b in FY23. Their EBIT in FY22 stood at Rs. 133.75 b, which is expected to be at Rs. 138.99 b in FY23. The company's adj. PAT in FY22 was recorded at Rs. 122.19 b, which is expected to be at Rs. 116.51 b in FY23.

Stock Advantages: HDFC Securities

According to HDFC Securities, "Growth catalysts for Wipro can be large synergy wins, with Capco/ Rizing and moderation in sub-contracting, supported by Topcoder. Key risks include integration of recent acquisitions and cost impact from accelerated local hiring (onshore wage inflation). We have factored in +10.0/+10.1% USD revenue growth and EBITM of 15.4/16.3% for FY23/24E respectively, resulting in an EPS CAGR of 6.4% over FY22-24E. Our target price of Rs. 475 is based on 19x FY24E EPS."

Growth moderation

Despite demand buoyancy lower than last year, the deal pipeline continues to be at an all-time high with digital and Cloud services gaining traction. Some growth moderation (relative to last 6 quarters) could be there ahead, but there's no fallout of demand and there are no cancellations and price discounting. Wipro is investing in solutions and capability building and believes that margin has bottomed out at 15%, which will reach at 17-17.5% in the future. Within verticals, there's some slowdown in US Retail and in capital market segment within BFSI. There are no structural headwinds from Europe Utilities clients, the brokerage firm said.

Strong pipeline in ER&D services

Wipro has a strong pipeline in ER&D services, driven by IoT & 5G initiatives and it expects ER&D growth to be higher than the company average. Wipro joint go to market with Capco had good synergy wins (60 wins in FY22) with smaller ticket size deals and it will now focus on increasing the ticket size of synergy deals. The offer to acceptance ratio has improved, which indicates moderation of attrition. Only marginal impact is seen from an increase in travel and facility costs in the medium term. The company has targeted fresher addition of 35k in FY23 vs 19k in FY22 and 8k pre-pandemic.

Company Portfolio:

Wipro Limited is a leading technology services and consulting company focused on building innovative solutions that address clients' most complex digital transformation needs. The company reported US$ 10.4 bn revenue in FY22. The company is recognized globally for its comprehensive portfolio of services, strong commitment to sustainability and good corporate citizenship, they have over 250,000 dedicated employees serving clients across 66 countries.

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.