Wipro shares jump despite muted Q1 guidance; share buyback to support stock price, say analysts

Shares of Wipro climbed 3 per cent in Friday's trade after a handful of brokerages said the IT stock may find support from the Rs 12,000 crore share buyback announcement. The Mach quarter results for the IT major were tepid and the guidance for June quarter was weak. The only positive in Wipro’s March quarter results, a brokerage said, was its large deal wins.

The stock price could get near term support due to buyback, said IDFC Securities in its latest note. Nirmal Bang Institutional Equities, which has a 'Sell' rating on Wipro, said it expects the buyback to provide support to the stock in the immediate term. This brokerage is assuming that the buyback will be executed in September quarter.

"Wipro announced a Rs 12,000 crore buyback at Rs 445 per share, at a 18.7 per cent premium to the current market price. The buyback involves 4.9 per cent of total shares outstanding. The buyback can provide a stabilising force to the stock price in the near term," Kotak Institutional Equities said.

There are lack of positive triggers in the near term and the buyback cushions the valuation, said HDFC Institutional Equities.

That said, the large buy-back program will deplete significant portion of cash and investments of the company and may hit its ability to maintain payout over FY24/25E, waned Motilal Oswal Securities.

The stock rose 2.56 per cent to hit a high of Rs 383.95.

Wipro share buyback biggest ever in size; IT major announces Rs 45,500 crore in buybacks in 8 years. Key details

Wipro Q4 results

The Bengaluru-based IT frm said its March consolidated quarter profit fell 0.4 per cent year-on-year (YoY) to Rs 3,074.50 crore from Rs 3,087.30 crore in the year-ago quarter. Sales for the quarter climbed 11.17 per cent to Rs 23,190.30 crore, with IT Services operating margin coming in at 16.3 per cent, flat sequentially.

Dollar revenue stood at $2,823 million while IT services reported a 0.6 per cent de-growth in revenues in constant currency terms sequentially. Wipro said it expects revenue from its IT Services business including India State Run Enterprise (ISRE) segment to be in the range of $2,753 million to $2,811 million, translating to a sequential guidance of minus 3 per cent to 1 per cent in constant currency terms.

Wipro Q4 results: Profit at Rs 3,075 crore; Rs 12,000 crore share buyback announced. Key details
 

Q1 guidance weak

Kotak said large deal wins at $1.1 billion was the only positive in Wipro's Q4 results. June quarter is seasonally weak for Wipro, yet the extent of deterioration implied by the guidance means either continuation of misery in macro-impacted verticals or revenue leakage, Kotak said.

"We suspect that it is a mix of both," it said while trimming its target for the stock to Rs 360 from Rs 370.

Emkay Global said despite the strong deal intake over the last few quarters, Q1 revenue growth guidance missed expectations, and divergence between deal intake and revenue conversion remains puzzling.

"We cut our EPS estimates for FY24/25 by 1.3 per cent/3.4 per cent, factoring-in the Q4 performance, buyback and weak Q1 guidance. We maintain BUY on the stock, with target price of Rs 470 per share at 17 times Mar-25E EPS (earlier, Rs 480)," it said.

Motilal Oswal Securities has cut its FY24E/FY25E EPS by 7.2 per cent and 4.4 per cent, respectively,  to factor in weaker FY24E growth due to a lower exit rate in the March quarter and muted 1HFY24. It has a neutral rating on the syock, as it views the current valuation as fair. This brokerage finds the stock worth Rs 360.

Also read: Axis Bank share price targets: What analysts say post Rs 5,728 crore loss