Brokerage firm Systematix has maintained a 'Hold' rating on Wipro, citing a 23% drop in quarterly bookings despite a slight improvement in operating margins. The report highlights that Wipro’s valuation remains at a 19% discount to its large-cap peers, reflecting concerns over slowing organic growth and weak demand from major clients.
Brokerage firm Systematix has maintained a 'Hold' rating on Wipro shares following the company's second-quarter earnings. While Wipro reported a slight improvement in profit margins, analysts remain cautious about the company's future growth path, pointing to a sharp decline in new order bookings.
In its latest quarterly results, Wipro managed a modest performance, with profit margins—the money the company keeps after covering operating costs—rising by 0.5% to reach 16.5%. However, the core issue identified by analysts is the volume of new work coming into the company. Total bookings for the quarter dropped to $2.6 billion, representing a 23% decline compared to the previous quarter. This drop is significant because bookings are an indicator of potential future revenue; a sustained decline makes it difficult for a company to maintain growth.
The brokerage has adjusted its price target for the stock to Rs 175, based on future earnings estimates for 2028. Currently, Wipro’s stock trades at a lower valuation than its major competitors, with a discount of approximately 19% compared to other large-cap IT companies. Analysts suggest that this discount exists because the market is waiting for a clear sign of growth, which has been missing in recent quarters.
Several factors are contributing to this cautious outlook. The company is facing pressure in specific areas like the healthcare sector and is also seeing the impact of seasonal demand patterns. Furthermore, the firm is navigating challenges related to a broader industry trend where clients are increasingly choosing to handle their technology needs internally—known as insourcing—rather than outsourcing them to IT services providers.
Management’s guidance for the coming quarter remains modest, suggesting a revenue growth range between -1.5% and +0.5%. This indicates that the company does not expect a major surge in demand in the immediate future. For investors, the key factor to watch will be how the company manages to convert its existing deals and whether it can improve the health of its large client accounts. Without a clear pick-up in the speed of deal conversions or a notable turnaround in underperforming business segments, analysts believe Wipro may continue to lag behind its industry rivals in the near term.