Wipro’s Q3 Aided by Inorganic Growth, but EPS Falls Short; Maintaining INR 495 FVE

Narrow-moat Wipro reported third-quarter results slightly above our top line expectations but fell short of our bottom line expectations due to weaker margins as a result of wage hikes and increased employee hiring, with over 10,000 employees added during the quarter. Wipro gave guidance of 2%-4% sequential revenue growth in its IT services segment for the quarter ahead. All in all, we are maintaining our INR 495 ($6.90 for U.S. ADR shares) fair value estimate for Wipro. We continue to believe Wipro is overvalued even with shares down 8% upon results--much like other Indian IT services giants Tata Consultancy Services and Infosys.