Analyst Note| Julie Bhusal Sharma |
Broad-based growth and pandemic-related cost-cutting led to third-quarter results within narrow-moat Wipro’s outlook. The IT services company brought in revenue toward the high end of its guidance and achieved margin expansion. Boosted profitability was a result of higher offshore mix and employee utilization and reduced headcount attrition, all brought on by the COVID-19 pandemic. Peers TCS and Infosys have shown similar benefits. As fourth-quarter guidance is within our former expectations, we are maintaining our fair value estimate for Wipro of INR 260 ($3.60 for the U.S. ADR) per share. With shares trading at INR 460 ($6.50 for the U.S. ADR) upon results, we still believe Wipro to be significantly overvalued, especially when considering our high uncertainty rating for the name--given the risk of Indian wage inflation. This risk does not take away from our belief that Wipro is well deserving of its moat.