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Wipro’s Q3 earnings have exceeded expectations, marked by its fourth consecutive quarter of margin growth, which pushed the company’s EBIT margin to a three-year high. As a result of this solid performance, several brokerages have raised their estimates for the IT company.
Despite a seasonally weaker quarter, Wipro posted strong margins, contributing to better-than-anticipated earnings. The company’s EBIT margin hit 17.5% in Q3, the highest in three years, fueling optimism among brokerages, with some even upgrading their forecasts for Wipro.
The IT major reported a 4.5% quarter-on-quarter growth in consolidated net profit, reaching Rs 3,354 crore for the December quarter, while revenue saw a modest increase of 0.1%, totaling Rs 22,319 crore. A survey by Moneycontrol, covering nine brokerages, had projected a 5% decline in net profit to Rs 3,040 crore, with revenue slipping by 0.6% to Rs 22,176 crore. Therefore, both the top and bottom lines came in well above expectations.
Wipro’s operational efficiencies and cost optimization strategies helped boost its EBIT margin to a three-year high, marking the fourth consecutive quarter of margin expansion, according to CFO Aparna Iyer.
Positive Brokerage Reactions: Upgrades and Price Target Increases
- Nomura: The brokerage lauded Wipro’s performance, especially on the margin front, and maintained its ‘buy’ rating with a target price of Rs 340. It also increased its FY25-27 earnings estimates for Wipro by 2-5%.
- Macquarie: Surprised by a 106 basis-point margin outperformance, Macquarie retained its ‘outperform’ rating, setting a price target of Rs 330.
- Nuvama Institutional Equities: Nuvama upgraded Wipro to a ‘buy’ rating, citing a favorable portfolio mix, leadership changes, strong margins, and attractive valuations. The brokerage raised its price target to Rs 350 and revised its FY25 and FY26 earnings estimates upward by 5% and 2%, respectively, to reflect the improved margin outlook.
Citi’s Cautious Stance: Growth Lag Expected
While Citi praised Wipro’s impressive margin performance, it expects the company’s growth to lag behind peers in FY26. As a result, Citi removed the stock from its negative catalyst watch but maintained a ‘sell’ rating, with a target price of Rs 280. However, Citi noted that Wipro’s stock might see short-term boosts due to expected EPS upgrades.
ADR Performance Signals Positive Outlook
Wipro’s American Depository Receipts (ADRs) on the NYSE surged by 4.2% to $3.44 following the release of its strong Q3 earnings, further signaling a potential positive opening for Wipro’s stock in Indian markets today.
On January 17, Wipro’s ADRs closed up 4.2% at $3.44. While its shares in India closed 2% lower at Rs 281.95, the upward movement in ADRs hints at investor optimism for Wipro’s performance.
Q4 Outlook: Modest Revenue Growth Expected
Looking forward, Wipro has guided for Q4 IT services revenue growth to be in the range of -1% to +1% in constant currency terms, aligning with market expectations.
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