Wipro falls post Q1 results; CLSA maintains underperform with a target of Rs 630

NEW DELHI: CLSA maintains an underperform rating on Wipro, after the IT major barely managed to meet its own revenue guidance, posting a 1.1 per cent sequential increase in revenues.

Reacting to the news, shares of Wipro fell 3.9 per cent to hit its intraday low of Rs 566.65 on the BSE.

The stock ended the day in red, down 3.73 per cent or Rs 21.95 at Rs 566.45.

CLSA maintains a 12-month target price of Rs 630, which still represents an upside of 7 per cent from Thursday's closing price of Rs 588.40 on the BSE.

Wipro slightly outperformed low expectations with a 1 per cent QoQ revenue growth in dollar terms. Anaemic beginning to the year was due to expected softness in Energy, Telecom and unexpectedly in Healthcare, said the Asia-focussed broker.

CLSA is of the view that pricing pressure and poor mix drove EBIT margin miss by 40 bps. Soft Q2 guidance suggests persistent issues in account mining and lack of leadership verticals.

Wipro said revenue would grow between 1.5 per cent and 3.5 per cent on a sequential basis in the second quarter, or $1.82 billion to $1.86 billion.

Analysts at CLSA are of the view that the commentary on stronger H2 must be seen in light of a poor start that keeps us circumspect of recovery.

With mining, lack of momentum verticals and pricing challenges to deal with, Wipro is swimming against the tide this year to outgrow 5.2% dollar revenues for the year, said the report.

The report added that Wipro's history of false starts doesn't inspire confidence on H2 acceleration till we see four quarters of consistency. CLSA have increased FY16 EPS by 4 per cent from lower taxes.

"We would shy away from looking for value till execution appears settled, stay underperform with 15x 1 yr fwd target of Rs 630," the brokerage house said.