Wipro Earnings: A Focus on Large Deals to Add Resilience in Hard Times; Shares Attractive

Narrow-moat Wipro reported a mixed second quarter. While the firm came under our top-line expectations, earnings per share surpassed our forecasts. Altogether, there’s no denying the IT services industry is in a slump as customers remain conservative on discretionary projects that go along with overall digital transformation trends. Nonetheless, we remain confident that this state is temporary—as bookings remain healthy, indicating overall demand for and recognition of the efficiencies that come with digital overhauls of a firm’s IT landscape. We think the market is too pessimistic that weaker macroeconomic times have moderated long-term demand, and overall, we like Wipro’s regrouping to focus on large deal wins—which we think will add to the business’ resilience. With this in mind, we are reiterating our INR 450 fair value estimate, with shares attractively priced.