Brokerages on Wipro Q3 results: Information technology major Wipro announced its December quarter (Q3FY25) results on January 17, 2025, post-market hours, which beat Street expectations. On the bourses, Wipro share rallied 8.33 percent to hit an intraday high of Rs 305.35 per share on Monday, January 20, 2025.
According to Nuvama, Wipro’s Q3FY25 performance was decent, exceeding expectations. IT Services revenue grew 0.1 per cent Q-o-Q and declined 0.7 per cent Y-o-Y in CC terms, surpassing both their own and market estimates of a 0.6 per cent and 0.5 per cent decline, respectively.
The IT Services Ebit margin improved by 70 basis points Q-o-Q to 17.5 percent, majorly ahead of expectations. Total contract value (TCV) remained stable at $0.96 billion, reflecting a 36% Q-o-Q decline but a 6% Y-o-Y increase.
Although Q4FY25 revenue growth guidance of -1 percent to 1 percent Q-o-Q CC is soft, it aligns with expectations. Wipro’s results are in line with Nuvama’s recent upgrade thesis, which saw the company upgraded to ‘Buy’ from ‘Hold’ in November 2024, driven by a favorable portfolio mix and strong margin performance.
Based on the improved margin outlook, Nuvama has revised FY25E and FY26E estimates upward by 5 per cent and 2 per cent, respectively. Additionally, the USD/Rs assumption for FY26/27 has been updated to 86.5. Nuvama maintains a ‘Buy’’ rating with an unchanged target price of Rs 350, valuing the stock at 25x FY27 PE.
Nomura highlighted that Wipro’s Q3FY25 revenue of $2,629 million (+0.1 per cent Q-o-Q and -0.7 per cent Y-o-Y in constant currency) exceeded the consensus estimate of -0.5 per cent Q-o-Q and was above the top end of its own guidance range of -2 per cent to 0 per cent Q-o-Q in CC terms.
In terms of verticals, healthcare and manufacturing saw strong growth at 6.7 per cent and 2.5 per cent Q-o-Q in CC, respectively, while BFSI recorded a 1.9 per cent Q-o-Q decline, primarily due to furloughs. IT Ebit margin increased 80bps Q-o-Q to 17.5 per cent, surpassing the consensus estimate of 16.5 per cent. The company reported an EPS of Rs 3.21 (+24.7 per cent Y-o-Y). Wipro also revised its capital allocation policy, now returning 70 per cent of net income to shareholders (up from the previous 45-50 per cent) in three-year blocks.
Thus, Nomura has raised its FY25-27E EPS estimates by 2-5 per cent, mainly due to an improved margin outlook. The target price remains unchanged at Rs 340, based on a 24x FY27E EPS valuation. Nomura maintains a ‘Buy’ rating on the stock, which is currently trading at approximately 20x FY27E EPS.
Motilal Oswal analysts project a FY24-27E IT Services revenue CAGR of approximately 3.1 per cent for the company. They anticipate Wipro to achieve an operating margin of around 17 per cent in FY25, leading to a 7.5 per cent CAGR in INR PAT over FY24-27E. Hence, the FY25E EPS estimate has been revised upward by approximately 5 per cent to account for the margin outperformance, while FY26E and FY27E EPS forecasts remain largely unchanged following the 3Q results. The firm maintains a ‘Neutral’ rating, considering the current valuation to be fair, with a target price of Rs 290, which corresponds to a 22x multiple of FY27E EPS.
Meanwhile, reports indicate that Macquarie has maintained an ‘Outperform’ rating with a target of Rs 330, noting that the Ebit margin surpassed expectations, supported by a higher dividend payout. The brokerage prefers Wipro over Tech Mahindra due to its turnaround plan.
Analysts at Emkay noted that Wipro delivered a better-than-expected operating performance in Q3. The Management highlighted that the impact of furloughs in Q3 was lower than anticipated. Despite the added pressure of a two-month salary hike, the IT Services Ebit margin expanded by 70 basis points to 17.5 percent, marking the highest level in the past 12 quarters. Deal intake remained steady at $3.5 billion, including approximately $1 billion in large deal bookings, with a book-to-bill ratio of 1.3x. While the management remains cautiously optimistic about demand, discretionary spending is gradually making a comeback. The deal pipeline continues to be robust, driven by cost takeouts and vendor consolidation deals, with a strong focus on deal conversions. However, the company’s Q4 growth guidance of -1 percent to 1 percent Q-o-Q CC is below expectations.
As a result, Emkay analysts have adjusted FY25-27 EPS estimates by 0.5 per cent to 3.1 per cent, factoring in Q3 performance and improved payouts under the revised capital allocation policy. Emkay maintains a ‘Reduce’ rating with a target price of Rs 290, valuing the stock at 20x December 2026E EPS.
Citi, too, maintained a ‘Sell’ rating with a target of Rs 280, citing an expected gradual recovery, according to reports. The brokerage also anticipates cost pressures in the coming quarters due to rising attrition rates. Additionally, Citi pointed out that forward-looking indicators for the sector remain weak.
Morgan Stanley reportedly has kept its ‘Underweight’ rating with a target of Rs 250, noting that margins have exceeded expectations despite the impact of wage hikes. The firm also observed that growth has largely been driven by the healthcare vertical
Wipro Q3 financial performance
Wipro’s Q3FY25 net profit rose 24.5 per cent Y-o-Y to Rs 3,350 crore, with a 4.5 per cent Q-o-Q increase. Revenue was Rs 22,320 crore, up 0.5 per cent Y-o-Y and flat Q-o-Q. The results exceeded Bloomberg’s estimates of Rs 22,221 crore in revenue and Rs 3,059 crore in profit.
“In a seasonally weak quarter, our strong in quarter execution helped us deliver above the top end of our revenue guidance. We also achieved our highest margins in the past three years while continuing to invest in our people. We closed 17 large deals with a total value of $1B. We are advancing steadily and investing decisively to lead our clients in an AI-driven future,” said Srini Pallia, CEO and managing director of Wipro.
Meanwhile, the IT services revenue stood at $2.62 billion, growing 1 per cent Y-o-Y and 1.2 per cent Q-o-Q. Wipro forecasted Q4 IT services revenue between $2.60 billion and $2.67 billion, implying a 1 per cent decline to 1 per cent growth in constant currency. Large deal bookings stood at $961 million, up 6 per cent Y-o-Y but lower than the previous quarter’s $1.5 billion.
Wipro also declared an interim dividend of Rs 6 per share. Meanwhile, reports indicate that Macquarie has maintained an ‘Outperform’ rating with a target of Rs 330, noting that the Ebit margin surpassed expectations, supported by a higher dividend payout. The brokerage prefers Wipro over Tech Mahindra due to its turnaround plan.
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