Wipro: Good times ahead? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Wipro: Good times ahead?

Jun 4, 2004

While stocks of the Indian software majors have had their share of high levels of volatility that has characterised their movements in the past years, there is one company, Wipro, which seems to have witnessed excessive volatility, more than its peers (see graph below). Well, apart from factors like the technology sector slowdown that resulted in a meltdown in technology spending worldwide, others like Wipro's service offerings and low liquidity in the stock added to the woes of shareholders.


Note: Returns are calculated on Rs 100 invested in June 1999

Without delving much into the past and detailing about what contributed to Wipro's slackened performance, the fact that the company has restructured its businesses and has extended its portfolio across a wide band of service offerings augurs well for its future growth. This is because the line of service offerings that Wipro has extended its presence into is also where the software industry expects higher growth to come from. For instance, a Mckinsey-NASSCOM study has projected the infrastructure outsourcing and package implementation businesses to grow at CAGR of 80% and 58% respectively over the next 4 years. And Wipro seems to be in line with this projected growth in markets for these services. While its infrastructure outsourcing business has grown by 34% YoY in FY04, the package implementation segment grew at almost double the rate (71%).

A major achievement of this restructuring exercise that Wipro is undergoing is the reduction in revenue contribution from its R&D services where the company provides technology development services mainly to the global telecom sector. This segment now contributes to around 32% of Wipro's IT services revenues, lower from over 50% in FY02. Technology R&D outsourcing has been a volatile story for all players engaged in providing these services. This is because, in the past couple of years of the slowdown, this was the first and the worst to get hit from the drop in global technology spending.

At the current price of Rs 1,471, Wipro trades at a P/E multiple of 33x FY04 earnings and 23x our expected FY06 earnings. While the stock will continue to trade at a premium to its peers due to low floating stock, the upside is likely to come from the fact that Wipro is in the process of establishing requisite systems in place to meet higher demand for its services going forward. The company has been aggressive on the inorganic growth front, and when these acquisitions begin to bear fruit, they will indeed be a major factor in the company's higher growth going forward.

Equitymaster requests your view! Post a comment on "Wipro: Good times ahead?". Click here!

  

More Views on News

WIPRO Announces Quarterly Results (3QFY21); Net Profit Up 21.5% (Quarterly Result Update)

Jan 14, 2021 | Updated on Jan 14, 2021

For the quarter ended December 2020, WIPRO has posted a net profit of Rs 30 bn (up 21.5% YoY). Sales on the other hand came in at Rs 157 bn (up 1.3% YoY). Read on for a complete analysis of WIPRO's quarterly results.

WIPRO 2019-20 Annual Report Analysis (Annual Result Update)

Dec 14, 2020 | Updated on Dec 14, 2020

Here's an analysis of the annual report of WIPRO for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of WIPRO. Also includes updates on the valuation of WIPRO.

WIPRO Announces Quarterly Results (2QFY21); Net Profit Down 3.0% (Quarterly Result Update)

Oct 14, 2020 | Updated on Oct 14, 2020

For the quarter ended September 2020, WIPRO has posted a net profit of Rs 25 bn (down 3.0% YoY). Sales on the other hand came in at Rs 151 bn (down 0.2% YoY). Read on for a complete analysis of WIPRO's quarterly results.

WIPRO 2018-19 Annual Report Analysis (Annual Result Update)

Jun 27, 2019 | Updated on Jun 27, 2019

Here's an analysis of the annual report of WIPRO for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of WIPRO. Also includes updates on the valuation of WIPRO.

More Views on News

Most Popular

My Recent Recommendation Will Profit from the Global Supply Chain Crisis (Profit Hunter)

Mar 31, 2021

A tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.

My Stock Trading Strategy (Fast Profits Daily)

Mar 31, 2021

In this video I'll show you exactly how I go about picking stocks for trading.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

If the Market Falls, I Will Do This... (Fast Profits Daily)

Apr 1, 2021

What should you do if the market falls? In this video, I'll tell you what I will do.

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

WIPRO SHARE PRICE


Apr 13, 2021 03:38 PM

TRACK WIPRO

WIPRO - NIIT COMPARISON

COMPARE WIPRO WITH

MARKET STATS