Wipro Earnings: Mixed Performance With Strong Margins but Soft Guidance

Narrow-moat Wipro delivered a mixed second quarter, with the top line meeting our estimates and the bottom line exceeding expectations. Despite securing a solid volume of large deals, it wasn't sufficient to offset an overall decline in bookings. Even considering a robust margin growth this quarter, the company lowered its revenue guidance for the upcoming quarter and we attribute this to the challenges stemming from converting its order book into revenue. While its peers are beginning to recover from the slowdown in macro spending, Wipro has yet to experience similar benefits in its operations. On the heels of that, we maintain our fair value estimate of INR 450. We still believe the shares are overvalued, and we suggest that investors wait for signs of recovery in secular demand and clearer revenue visibility.