Wipro shares trading at expensive valuation, offer little margin of safety, says Kotak Equities; downgrades to ‘Sell’

livemint.com:

Wipro to ‘Sell’ on unattractive risk-reward and has revised the target price on the stock to ₹440 per share from ₹430 earlier, following a sharp 34% stock upmove in the past three months. It believes Wipro stock is expensive at 21X FY2026E earnings and trades at just 6-9% discount to Infosys and HCL Technologies despite significantly weaker fundamentals. Also Read: Vodafone Idea share price falls over 4% after board approval to raise ₹45,000 crore “Wipro has materially underperformed peers such as Infosys and HCL Technologies on growth in the past several years and yet commands hefty multiple of 21X FY2026E earnings, at just a 6-9% discount.

Wipro, on an average, has underperformed on revenue growth by ~5% versus Infosys and HCL Tech on organic constant currency (CC) basis in the past 10 years," Kotak Institutional Equities said in a note. The underperformance has continued under the current CEO’s tenure with the reduction in gap in FY2021 and FY2022 offset by the increase during the past couple of years, it added. Moreover, Wipro faces multiple challenges, both internal and external, which have created headwinds to growth.

Attrition in key management personnel is elevated and not a good sign in later years of turnaround effort. Mega deal announcements have been muted, the brokerage firm noted. It believes Wipro is susceptible to share losses in vendor consolidation events on a net basis and estimates a modest 3.6% USD revenue CAGR in FY2024-26.