IT

05 May

Confident‌ ‌of‌ ‌achieving‌ ‌FY22‌ ‌growth‌ ‌guidance-‌ ‌L&T‌ ‌Technology‌

Update on the Indian Equity Market:

On Wednesday, NIFTY closed at 14,618 (+0.8%). Top gainers in NIFTY50 were Sun Pharma (+5.9%), UPL (+4.8%), and IndusInd Bank (+2.5%). The top losers were Adani Ports (-3.6%), Bajaj FInance (-1.8%), and SBI Life (-1.3%). The top sectoral gainers were PHARMA (+4.1%), BANK (+1.6%), and PVT BANK (+1.5%) and the only sectoral loser was REALTY (-1.0%).
Excerpts of an interview with Mr Amit Chadha, MD & CEO, L&T Technology (LTTS) with CNBC -TV18 dated 4th May 2021

  • US & Europe back on track in terms of decision making cycles and budgets.
  • They have been a little worried about the near-term execution challenges in India. Taking that into account and assuming that things will come back sometime in May, they have guided 13-15 percent growth in revenue in FY22. However, they aspire to do more.
  • The company will be able to maintain an EBIT margin of 17 percent. They are back at 16.6 percent EBIT in 4QFY21. As they move forward, the entire focus will be to ensure they continue to grow profitably. 
  • No projects have been cancelled due to the 2nd wave of COVID.
  • There is still some headroom to achieve 80% utilization levels.
  • Attrition at 12 percent is the lowest in the industry. But Mr Chadha is expecting attrition to pick up in 1QFY22 due to seasonality. 
  • The company will be hiring 1,200 freshers in FY22 and has given increments to junior and mid-level employees effective April 1. However, senior employees will be given wage hikes from July 1.
  • Commercial aerospace segment is still weak and will take time to recover. Growth trajectory of transportation is robust; plant engineering grew 10% QoQ.
  • They have been picky on the hi-tech deals given their focus on margin. 

Asset Multiplier comments:

  • As businesses increasingly move their operations to the cloud, the demand for enabling software and services will continue to increase.
  • The ongoing pandemic has pushed many enterprises to implement work-from-home policies for the first time, and this has created a demand for collaborative applications and softwares, which is likely to drive growth for software companies.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of LTTS was ₹ 2,569/- as of 05-May-2021.  It traded at 30x/ 26x the consensus earnings estimate of ₹ 85.5/ 99.9 for FY22E/23E respectively.
  • The consensus price target is ₹ 2,486/- which trades at 25x the earnings estimate for FY23E of ₹ 99.9/-

 Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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27 Apr

Expanding hiring of freshers based on demand – HCL Tech

Update on Indian Equity Markets:

Markets continued their upward momentum on Tuesday as Nifty closed the day 174 points higher at 14,659. Within the index, HINDALCO (5.1%), TATASTEEL (3.9%) and DIVISLAB (3.5%) were the highest gainers while HDFCLIFE (-3.6%), SBILIFE (-1.4%) and MARUTI (-0.9%) were few of the losers. All the sectoral indices closed in green with METAL (2.8%), PSUBANK (2.5%) and MEDIA (1.8%) leading the pack. 

Excerpts of an interview with Mr C Vijaykumar, CEO and Prateek Aggarwal, CFO, HCL Technologies Ltd (HCLTECH) with CNBC -TV18 dated 26th April 2021:

  • During the Mar-21 quarter, bookings stood at $3.1bn, led by 19 large deal wins. These deals are spread across geographies and industries. Most deals are spread across 3-5 years, of which four are integrated across service lines.
  • The Company has prepared a list of seven countries i.e. Germany, Canada, Japan, Spain, Portugal, Mexico and Brazil. These are countries witnessing a large and growing IT market where the Company is currently not present. Setting up offices in new countries is a one-time exercise.
  • The Company is also expanding hiring in the freshers space, considering the demand for the next few years. The hiring also involves certain cost elements.
  • The Company has launched HCL Now, which is the Cloud version of its acquired products. This is strengthening partnerships of HCLTECH with hyperscalers.
  • The Company is expected to deliver double-digit growth in constant currency. The management highlighted that they have provided floor price on revenue growth for next year. 
  • The products and platforms business had an impairment charge of $16mn, leading to a 60 bps impact on margins.   

Asset Multiplier Comments:

  • Backed by deal wins in both small and big pockets and continued momentum in cloud and data, the company looks set to achieve its target of double-digit growth over FY22E.
  • Setting up offices in new countries to expand the geographical presence is expected to create a revenue stream and diversify the revenue base for the Company in the long run.

Consensus Estimates (Source: market screener website):

  • The closing price of HCLTECH was ₹ 928/- as of 27-April-2021.  It traded at 18x/ 16x the consensus EPS estimate of ₹ 51.0/ 57.4 for 22E/23E respectively.
  • The consensus price target is ₹ 1,119/- which trades at 19x the EPS estimate for FY23E of ₹ 57.4/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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26 Apr

Confident of being profitable at PAT level – Nazara Tech

Update on the Indian Equity Market:

On Monday, NIFTY closed at 14,485 (+1.0%). Top gainers in NIFTY50 were Axis Bank (+4.2%), JSW Steel (+3.4%), and Ultratech Cement (+3.3%). The top losers were Cipla (-2.9%), Britannia (-2.8%), and HCL Tech (-2.7%). The top sectoral gainers were REALTY (+3.4%), METAL (+2.0%), and PVT BANK (+1.8%) and the only sectoral loser was PHARMA (-0.9%).


Excerpts of an interview with Mr. Manish Agarwal, CEO, Nazara Tech (NAZARA) with CNBC -TV18 dated 23rd April 2021

  • The Company’s EBITDA numbers are a good indication of the health of the operations. In terms of Gamified Early Learning, e-Sports and Freemium, he said that they are very positive about these three segments. 
  • These three verticals are being driven by the massive consumer trends and have accelerated since the last year because of the pandemic.
  • He believes all three segments will continue to drive growth. According to him, the paying subscribers for Gamified Early Learning segment have grown 172 percent from April 2020 to March 2021.
  • In the e-Sports business, Nazara Technologies is a market leader with an 80 percent share. Their attempt & aspiration is to innovate more and grow in this market.
  • They are very gung-ho about Freemium because in-app purchase – the habit of buying virtual items is going to increase in India and that will become a very strong growth driver.
  • On Real Money gaming, the company has a strategically cautious approach. Telco Subscription business is a mature business. 
  • It is a cash cow for them. This business generates around 20-28 percent EBITDA, hence the opportunity is big.
  • They do not have any debt on their books, they are a cash-rich company. So, there is no interest to be paid out.

Asset Multiplier comments:

  • As Nazara operates in high-growth business segments such as gaming, gamified learning, and Esports, they will continue to drive profitable growth. The management is prioritizing growth over profit maximization at this stage so that they can achieve and maintain market leadership in the segments they operate in.
  • E-sports, which contribute ~37% to the total revenue is disrupting traditional sports worldwide. It is an outcome of sports and gaming intersecting to create fast-paced spectator entertainment content.

Consensus Estimate: 

  • The consensus estimates and price targets are not available for NAZARA.

 Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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21 Apr

Expect 20 percent plus EBITDA margins to continue – Mindtree

Update on the Indian Equity Market:

The Indian Equity market indices gained after the Indian government announced that all citizens over the age of 18 can have Covid-19 vaccinations from May 1.  The markets pared morning gains as investors were worried due to the increasing Covid-19 cases in the second wave. Nifty 50 ended at 14,296 (-0.4%).  Among the stocks, DRREDDY (+3.6%), BAJAJFINSV (+3.5%), and HDFCLIFE (+3.0%) ended with gains while ULTRACEMCO (-4.9%), HCLTECH (-3.4%), and HDFC (-3.3%) led the losers. Among the sectoral indices, MEDIA (+3.0%), PHARMA (+1.3%), and AUTO (+1.0%) led the gainers while IT (-1.4%), FMCG (-0.6%), and FINANCIAL SERVICES (-0.6%) led the losers.

Excerpts of an interview with Mr. Debashis Chatterjee, MD & CEO, Mindtree aired on CNBC TV-18 on 19th April 2021:

  • Mindtree reported 4QFY21 quarterly results, with the consolidated net profit reporting a ~54% YoY growth to Rs 3,174 mn due to strong operational efficiency.
  • Two successive quarters of 5percent plus growth instills confidence in the Company in terms of momentum generated by deal closures.
  • The order book stood at USD 1.4 bn as of 31-March-21. The order book was 12% more than the previous year. The pipeline has never been stronger and with the changes done in terms of the 4*4*4 strategy- the execution is going well.
  • They have focused on some of the strategic accounts and focusing on cross-selling and up-selling as a part of their strategy. Considering these factors, they remain confident of delivering double-digit growth in FY22E and maintaining the margins at 20 percent plus.
  • They have added net 1600 employees in 4QFY21. Owing to a strong pipeline and a high demand, Mr. Chatterjee expects hiring to be robust in the next couple of quarters.
  • The war for talent has aggravated in the last couple of quarters. With a focus on cross-skilling of employees, they have been able to contain the attrition.
  • There has been a delay in BFSI deal closures, which are expected to happen in 1QFY22. Given the interest rate regimes, there have been some in-sourcing trends in the banking clients. Post the deal closures in 1QFY22, there is some recovery expected in the BFSI vertical.

Asset Multiplier Comments

  • The commentary on deal signings, consistent margin improvement, and the ability to sustain these improved margins are key positives for the Company.
  • The pandemic accelerated clients’ interest in Data, Cloud migration, and other disruptive technologies, across IT services companies. This is expected to benefit IT services companies for the foreseeable future.

Consensus Estimate: (Source: market screener website)

  • The closing price of MINDTREE was ₹ 2,033/- as of 20-April-2021. It traded at 25x/ 24x the consensus earnings estimate of ₹ 80.1/ 86.1 per share for FY22E/FY23E respectively.
  • The consensus target price of ₹ 1,857 implies a PE multiple of 22x on FY23E EPS of ₹ 86.1/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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15 Apr

Looking to maintain double-digit growth over FY23-24E – TCS

Update on the Indian Equity Market:

After a mid-week break, markets continued to remain volatile as Nifty started the day lower but managed to close 0.5% higher at 14,581. Within the index, TCS (4.0%), WIPRO (3.5%) and CIPLA (3.3%) charged the index higher while GRASIM (-3.1%), EICHERMOT (-3.0%) and MARUTI (-2.5%) led the losers. Among the sectoral indices, PHARMA (1.4%), METAL (1.4%), and FIN SERVICES (1.2%) were some of the winners while PSU BANK (-1.3%), AUTO (-1.3%), and MEDIA (-0.7%) closed in the red. 

Excerpts of an interview with Mr. Rajesh Gopinathan, MD & CEO, NG Subramaniyam, COO, V Ramakrishnan, CFO, and Milind Lakkad, Executive VP of Tata Consultancy Ltd (TCS) with CNBC -TV18 dated 13th April 2021:

  • During the Mar-21 quarter, almost all the markets and verticals reported sequential growth. The hospitality and travel areas are still under stress. In response, the company is coming up with new ways of investments and then preparing for the post-pandemic era. 
  • The technology shift is moving as per the expected trajectory. The industry is witnessing overall growth in the transformation agenda.
  • With the deal momentum of US$ 9.2bn, a mixture of smaller and big deals, and an improving economic outlook, the company has set the target of maintaining double-digit growth in revenues over FY23-24E.
  • As per the full-year plans for TCS, the company completed 19,400 hires. The number includes hiring for FY22E as well. Additionally, the company has made investments for taking business from consulting.
  • The margin profile for large deals is eroding due to competition. From here on, innovative solutions will drive the sustainability of margins.
  • The company expects a positive trend in both emerging and developed markets. There are lots of opportunities in manufacturing, telecom, retail, and media.

Asset Multiplier Comments:

  • Backed by deal wins in both small and big pockets and continued momentum in cloud and data, the company looks set to achieve its target of double-digit growth over FY23-24E.
  • Record employee addition of 19,400 hirings along with record low attrition of 7.2% strengthens the growth opportunity prospects over the next two years. 

Consensus Estimates (Source: market screener website):

  • The closing price of TCS was ₹ 3223/- as of 15-April-2021.  It traded at 30x/ 27x the consensus EPS estimate of ₹ 108/ 119 for FY22E/23E respectively.
  • The consensus price target is ₹ 3,401/- which trades at 29x the EPS estimate for FY23E of ₹ 119/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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30 Mar

Maintaining FY22 guidance of topline of over Rs 100 bn – Dixon Technologies

Update on the Indian Equity Market:

On Tuesday, NIFTY closed at 14,844 (+2.3%). Top gainers in NIFTY50 were UPL (+7.6%), JSW Steel (+4.9%), and Shree Cement (+4.9%). The top losers were Hindalco (-0.3%), Axis Bank (-0.2%), and M&M (-0.1%). The top sectoral gainers were IT (+2.9%), METAL (+2.8%), and PHARMA (+2.7%), and the only sectoral loser was REALTY (-0.03%).
Excerpts of an interview with Mr. Atul Lall, MD, Dixon Technologies (DIXON) with CNBC -TV18 dated 26th March 2021

  • He estimates FY21 revenue to be around Rs 62-63 bn, which is a decent growth over last year’s revenue of almost Rs 44 bn. They will also have growth in profitability. 
  • This is despite Q1 being a complete washout because of the pandemic. In FY22, they are targeting very aggressive growth. 
  • He had previously mentioned a revenue estimate of Rs 100 bn plus in FY22 and a significant increase in the bottom line as well. They still stand by the same; possibility they will do even better.
  • He expects the EBITDA margins to remain in the range of 4.4-4.5 percent going ahead on the back of the product mix. He is also expecting a 25-30 percent CAGR run-rate in topline post FY22.
  • He expects Capex to be ~2,500-2,600 mn in FY22 and he expects FY22 to be a solid growth year for the company.
  • He said that commodity price rise is impacting the consumer durable companies.
  • They have two kinds of revenue streams. One is an OEM revenue stream wherein they work on a prescriptive basis. All price increases on the commodity side, they have been able to pass on to their principle because that is the way the contracts are drafted.
  • He also said that for FY21, Dixon Technologies has met the eligibility criteria on investment and revenue threshold for handset manufacturing PLI. However, they have not yet heard from the government.

Asset Multiplier comments:

  • The COVID-19 pandemic has left a lasting impact across all walks of life, and the electronics industry is no exception as it has also suffered a decline in growth. This is a temporary phase – especially for consumer electronics and appliances – as some of these devices have grown to be an integral part of our lives.
  • The electronics industry is basically divided into two categories—industrial electronics and consumer electronics. The latter has witnessed more growth than the former due to its popularity among consumers and because of more foreign direct investment in it. 
  • The industrial electronics segment in India is still facing challenges because of various taxation policies and the lack of an ecosystem for manufacturing components.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of DIXON was ₹ 3,635/- as of 30-March-2021.  It traded at 122x/ 67x/ 49x the consensus earnings estimate of ₹ 29.7/ 54.5/ 74.4 for FY21E/22E/23E respectively.
  • The consensus price target is ₹ 3,288/- which trades at 44x the earnings estimate for FY23E of ₹ 74.4/-

 Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

 

 

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15 Feb

Actively looking for acquisitions – Happiest Minds

Update on the Indian Equity Market:

On Monday, Nifty closed in the green at 15,315. Among the sectoral indices, Bank (+3.3%), Private Bank (+3.3%), and Financial Services (+2.9%) closed higher. Metal (-0.5%), IT (-0.4%) and Pharma (-0.3%) closed in the red. Axis Bank (+6.2%), ICICI Bank (+4.2%), and SBI (+4.0%) closed on a positive note. SBI Life (-2.3%), HDFC Life (-2.1%), and DR Reddy (-1.8%) were among the top losers.

Excerpts from an interview of Mr. Joseph Anantharaju, Executive Vice Chairman & CEO of Product Engineering Services, and Venkatraman Narayanan, MD and CFO, Happiest Minds with CNBC-TV18 dated 12th February 2021:

  • The company guided for a 20% revenue growth rate. The demand has panned out well.
  • The company won 6 new deal wins in 3QFY21.
  • Speaking about verticals, Mr. Joseph said edutech was doing well. The company received new requests and projects.
  • The industrial, B2B, and logistical space seem to be having new initiatives, which are leading to higher demand.
  • On operating margins, he said for the last 3 quarters the company is delivering margins in the range of 21-23%.
  • The company has guided for a profit margin of 22%-24% in FY22E.
  • On revenue growth, the company will maintain long term growth at 20%.
  • The company witnessed some efficiencies in the past 3 quarters, the plan is to retain some of those going forward.
  • The company recently completed an acquisition of PGS for 8.25 mn$. The company is actively looking for acquisitions.
  • On dividend, the company has not yet declared but the board will look after it.

 

Asset Multiplier comments:

  • The improvement in new deals signed and increased focus on IT budgets by clients has been mentioned by most of the IT Companies during the December quarter earnings call.
  • In 3QFY21, most of the IT companies have significantly expanded their operating margins, which was a result of continuing control on costs and improved sales.
  • It would be interesting to watch the performance of IT companies in the next couple of quarters, as companies have guided for lower margins but if cost control continues (led by on-off shore mix, WFH) then the margins might sustain these high levels.

 

Consensus Estimate: (Source: TIKR website)

  • The closing price of Happiest Minds was ₹ 401 as of 15-February-2021.  It traded at 36x/35.8x the consensus Earnings per share estimate of ₹ 11/11.2 for FY21E/FY22E/ respectively.
  • The consensus average target price is ₹ 385/- which implies a PE multiple of 34x on FY22E EPS of 11.2/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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28 Jan

Seeing progress on the order book and large deals– Cyient

Update on the Indian Equity Market:

 

On Thursday, Nifty closed 1.1% lower at 13,818. Within NIFTY50, AXISBANK (+5.5%), SBIN(+2.6%), and IOC (+1.6%) were the top gainers, while HINDUNILVR (-3.7%), MARUTI(-3.4%), and WIPRO (-3.0%) were the top losing stocks. Among the sectoral indices, BANK (+6.0%), and PRIVATE BANK (+0.2%)were the only gainerswhileREALTY (-2.2%), IT (-2.2%), and FMCG (-1.9%) were the top losing sectors.

 

Seeing progress on the order book and large deals– Cyient

 

Excerpts of an interview with Mr. Karthikeyan Natarajan, President & COO, Cyient, aired on CNBC-TV18 on 28thJanuary 2021:

  • After a dip in performance in 1QFY21, Cyient is seeing a steady sequential recovery. Revenue growth and margins improved in 2QFY21 and further in 3QFY21 as well. Management expects further improvement in 4QFY21.
  • Cyient management has been able to bring in operating efficiency on the back of off shoring, utilizations, improving their pyramid structure, and through automation.
  • Cyient is making steady progress on digital transformation and expect that to accelerate in FY22E.
  • Management expects a revenue decline of ~10% in FY21E.
  • Cyient saw softness in aerospace & defense and few other verticals in the period between 1QFY20 to 1QFY21. Cyient restructured about 3 months ago and is now focusing more on good markets which should put them in a much better shape.
  • Cyient saw some one-off supply chain issues in the medical technology and healthcare business which led to 10% decline on a QoQ basis in that segment. But management expects the YoY growth momentum in this segment to remain strong.
  • Order book in 3QFY21 also included some impact of pent up demand. Management is seeing progress in order intake and has closed about 5 large deals worth USD 106 mn.
  • Within aerospace segment, Defense continues to be strong. Commercial aerospace remains soft but management hopes to stabilize to 3QFY21 levels in the near term. The next level of growth in aerospace segment will come post the vaccination drive over next 6-9 months.

 

Consensus Estimate (Source: market screener website)

  • The closing price of CYIENTwas ₹ 625as of 28-January-2021. It traded at 19x/ 16x/ 14x the consensus EPS estimate of ₹33.4/39.5/45.8 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 621/- implies a PE multiple of 14x on FY23E EPS of ₹45.8/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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18 Jan

Confident of leading industry performance for next 2-3 years – HCL Tech

Update on Indian Equity Market:

Markets started the fresh week on a selling spree as Nifty closed the day 205 points lower at 14,228. The intensity of selling was such that only six out of 50 stocks closed the day in green led by UPL (6.3%), RELIANCE (2.1%), and TITAN (1.3%) while TATAMOTORS (-6.1%), TATASTEEL (-5.9%), and ONGC (-5.1%) led the losing pack. All the sectoral indices closed the day in red with METAL (-4.6%), PSU BANK (-3.1%), and PHARMA (-3.1%) bleeding the most.

Excerpts of an interview with Mr C. Vijayakumar, President & CEO- HCL Technologies Ltd (HCL Tech) with CNBC TV18 dated 15th January 2021:

  • The company reported revenue growth of 3.5%, higher than the guidance. The margin for the quarter was also at a six-year high. Mr Vijayakumar said that the company has outperformed guidance for two quarters in a row led by a stupendous performance from products and platforms segment.
  • He said that DWS acquisition would contribute to 1% growth in 4QFY21E. The company has signed 13 deals across verticals. The company is positive about the outlook for FY22E.
  • The next five years are expected to be better than the past five years. The company is expected to lead the industry performance for the next 2-3 years. 
  • More work and revenue shifting of offshore and sales, general, and administrative (SGA) leverage contributed to superior margin performance in 1HFY21. Some of the expenses are expected to come back, but not at pre-COVID levels.
  • The company gave the salary increments to a large section of employees during 3QFY21. This has led to a headwind of 50 bps in margins. Further, the company is expected to give increments to seniors and a larger population which would be eroding about 80 bps from the margins.

Consensus Estimate: (Source: market screener)
• The closing price of HCL Tech was ₹ 978/- as of 18-January-2021. It traded at 20x/ 19x/ 17x the consensus earnings estimate of ₹ 49.3/ 52.0/ 58.0 for FY21E/FY22E/23E respectively.
• The Consensus price target of HCL Tech was ₹ 1,073/- as of 18th January 2021 which is 19x of FY23E EPS estimate of ₹58.0/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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14 Jan

Greater need for technology across enterprises led to growth – Wipro

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/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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