Wipro Limited

WIT Details

WIT Receives Badge: Wipro Limited (NYSE: WIT) is engaged in providing broad-based IT solutions and services, which incorporates systems integration, package execution, Information Systems outsourcing, software application development and maintenance, & R&D services to corporations on a worldwide basis. On 23 April 2021, WIT informed the market that it has accomplished the Google Cloud Partner Specialization in application enhancement. This depicts the company’s fourth Partner Specialization badge achieved from Google Cloud.

4QFY21 Key Financial Highlights: During the quarter, the company reported gross revenue of Rs 162.5 billion (or $2.2 billion), depicting an increase of 3.4% from the prior corresponding period. Revenues from IT Services segment came in at $2,152.4 million, up 3.8% on pcp. Net income in 4QFY21 stood at Rs 29.7 billion (or $406.4 million), depicting a rise of 27.8% on pcp. During the quarter, the company recorded an expansion of 340 bps on pcp in operating margins. The company exited the period with a cash balance of $2,321 million.

Key Financial Highlights (Source: Company Reports)

Key Risks:  On the flip side, adverse currency translations, volatile macroeconomic environment and global pandemic led by COVID-19 outbreak are key persistent challenges to the company. Further, regulatory concern, stiff competition and cyber-security threat add to the woes.

Outlook: For 1QFY22, the company expects revenue from its IT Services business to be between $2,195 million to $2,238 million, depicting a rise of 2-4% on a sequential basis. The company remains on track to focus on key strategic areas, bolstering its foothold in emerging technology like digitalization, and expanding market footprint in newer markets.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: Over the last six months, the stock went up by ~45.4% and ~143.9% in the one year. The stock made a 52-week low and high of $2.79 and $7.22, respectively. On the technical analysis front, the stock has a support level of ~$6.85. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with a correction of low-single-digit (in percentage terms). We believe that the company can trade at a slight discount as compared to its peer’s median, considering the challenging market condition in which it operates, changes in government policies, and cyber-security threats. We have taken peers like Cognizant Technology Solutions Corp (NASDAQ: CTSH), Accenture PLC (NYSE: NYSE), to name a few.  Considering the spike in the stock price over the last few month, current trading levels, and COVID-19 led uncertainties, we are of the view that most of the positive factors have been discounted at the current juncture. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the closing price of $7.17 as on 23 April 2021.

WIT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Tata Motors Limited

TTM Details

Q4FY21 Markey Update: Tata Motors Limited (NYSE: TTM) is India's one of the top automotive manufacturers, with a market capitalization of $15.08 billion as on 23 April 2021. Recently, the company informed the market regarding its key number recorded in Q4FY21. During the period, global wholesales, including Jaguar Land Rover stood at 3,30,125 numbers, depicting a rise of 43% on a year over year basis. Worldwide wholesales of all Tata Motors’ commercial vehicles and Tata Daewoo stood at 1,09,428 number in 4QFY21, up by 55% on pcp. Further, global sales of all passenger vehicles during the period increased by 39% year over year and came in at 2,20,697 number.

3QFY21 Key Results: During the quarter, the company reported total revenues from operations of Rs 75.7K crores, depicting an increase of 5.5% year over year. EBIT for the period came in at 6.4%, up 450 bps on a year over year basis. Consolidated EBITDA came in at 14.8%, depicting an increase of 540 bps year over year. JLR and TML(S) delivered robust results with EBITDA up 560 bps and 570bps, respectively, year over year in 3QFY21. The company reported robust positive free cash flow in both JLR and TML(S).

Key Highlights (Source: Company Reports)

Key Risks: The company faces stiff competition from companies that provide similar services. Further, adverse currency translations, volatile macroeconomic environment and global pandemic led by COVID-19 outbreak are key persistent challenges to the company.

Outlook: Looking ahead, despite continuous uncertainties led by COVID-19 outbreak, the company expects to consolidate its gains and come out stronger in the days ahead. The company remains confident given its consistent, competitive, cash accretive growth and focuses more on implementing its growth strategy across its business operations.

Stock Recommendation: The stock of TTM gave a positive return of ~117.4% during the span of six months and 304.6% in the past one-year period. The stock of the company is currently trading very close to its 52-weeks’ high level of $23.7. On a technical front, the stock of TTM has a support level of ~$15.98 and a resistance level of ~$23.62. On the valuation front, the stock is trading at a P/BV multiple of 1.8x as compared to the industry median of 0.9x on TTM (Trailing Twelve Months) basis. Considering the spike in the stock price over past months, current trading levels, valuation on TTM basis and challenging market condition in which it operates, we are of the view that most of the positive factors of the company have been discounted at the current juncture. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the closing price of $19.70, up by 2.6% on 23 April 2021.

TTM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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