“Turnaround plays require a margin of safety to take care of bumps along the way. Wipro, trading at 23.4 times FY2023 estimated earnings, does not provide that margin of safety,” said Kotak Institutional.
“…for Wipro to generate 10% return (COE) from the current market price requires 13% EPS (earnings per share) CAGR (compounded annual growth rate) over the next 10 plus years. Assuming no margin expansion, this translates into 11% revenue CAGR and around 2% depreciation of INR (rupee) against USD (US dollar),” said Kotak Institutional which has a target price of Rs 530 on the stock.
The brokerage said that the stock trades at a premium to Infosys and only at a marginal discount to . To trade at the same multiple as the sector leaders, Wipro needs a far higher growth, said Kotak Institutional.
“Upsides can accrue if Wipro hits better-than-peer growth rates sustainably, a scenario that requires high win rate in large deals, success in large account and better profile of customer to the existing clients and flawless execution of the new organization design and people changes,” said Kotak Institutional.
