Greater need for technology across enterprises led to growth – WiproMaitreyee Vaishampayan
Update on the Indian Equity Market:
On Thursday, after another volatile session, Nifty 50 ended at 14,596 (+0.2%). Among the sectoral gainers, PHARMA (+0.8%), FMCG (+0.8%), and AUTO (+0.3%) led the gainers, while METAL (-1.0%), MEDIA (-0.2%), and BANK (-0.2%) led the losers. UPL (+3.7%), BPCL (+3.2%), INDUSINDBK (+3.0%) led the index higher while HCLTECH (-2.4%), GRASIM (-1.8%), and JSWSTEEL (-1.7%) led the laggards.
Wipro recently declared strong 3QFY21 numbers. Mr. Jatin Dalal, President and Chief Financial Officer (CFO) explained that a greater need for technology by clients across enterprises led to growth. The interview was published in Business Standard on 14th January 2021:
• A greater need for technologies like cloud, cybersecurity, and data analytics contributed to a strong set of numbers. With most business models becoming virtual has meant that greater investment in technology is taking places across Wipro’s customer base.
• Of Wipro’s seven business units, five delivered over 4 % sequential growth which suggests broad based growth.
• Over 92 percent staff is still working from home, which is not going to change in 4QFY21. About 2.5 percent staff is working from office, and about 5 percent staff is working from customer locations.
• Depending on the situation in April vis-à-vis Covid, they will think about the eventual model for employees working from home or office.
• There was double digit growth in order bookings in 3QFY21 and Wipro is entering the March quarter with a good set of pursuits.
• There is a significant momentum in clients’ spend, driven by cloud transformation, digital transformation, and investment in cybersecurity. Overall, there is an increase in IT spend.
• 3,000 freshers were added in 3Q and Wipro will continue to add more in 4QFY21.
• They do not foresee any adverse outcomes of Brexit on their European business. They expect more decision making around the future architecture and future scheme of things that customers will have post-Brexit.
• The sector-specific initiatives by the new Biden administration in US needs to be watched out.
Consensus Estimate: (Source: market screener website)
• The closing price of Wipro was ₹ 453/- as of 14-January-2021. It traded at 24x/ 23x/ 21x the consensus earnings estimate of ₹ 18.8/ 19.4/ 21.2 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 459 implies a PE multiple of 22x on FY23E EPS of ₹ 21.2/-.
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