Analyst Note| Julie Bhusal Sharma |
Wipro’s fourth-quarter results came in toward the high end of management’s guidance--as demand for digital transformation projects has picked up from weakness brought on by the global pandemic. The quarter was the first one in which Wipro worked under its new operating model that has reduced the number of organizational layers within the company. Still, margin expansion appeared to come largely from offshore mix and employee utilization being at their highest levels ever due to pandemic-related tailwinds--some of which we think will be temporary. We’ve increased our expectations for fiscal 2022 as we expect acquisitions of consultancy and services firms Capco and Ampion should serve as a helpful complement to organic growth--especially within the banking, financial services, and insurance verticals. As a result, we are increasing our fair value estimate for Wipro to INR 270 ($3.50 for the U.S. ADR) from INR 260 ($3.60 for the U.S. ADR) per share. With shares trading near INR 430 ($6.40 for the U.S. ADR) upon results, we view Wipro as significantly overvalued and suggest investors hold back from investing in the narrow moat name.