Wipro’s Q4 Results Worth the Wait; Raising FVE to INR 520; Shares Fairly Valued

Narrow-moat Wipro reported fourth-quarter results that were worth the wait—as earnings came in several weeks after peers TCS and Infosys—an anomaly for the competitors. Results beat our EPS estimates due to nicer margins than we expected, as we thought the massive labor shortage would have a greater toll on the quarter. Considering the beat and rolling our model by another year, we are increasing our fair value estimate to INR 520 ($6.80 for U.S. ADR shares) from INR 495 ($6.90 for U.S. ADR shares). After a long stretch of the stock having been overvalued, in our view, we believe that the market is now on point in terms of pricing, even with shares down 3% after results (which we think is a reflective of overall market activity). As a result, we think investors are safe holding onto shares of the narrow moat stock at the moment. We continue to stress that we believe the labor related headwinds that the IT services industry is undergoing will ease eventually, especially with the help of automation offsetting headcount dependency.