Wipro Shares: Hold Rating Stands, Rs 260 Target Set by Analysts

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AuthorIshaan Verma|Published at:
Wipro Shares: Hold Rating Stands, Rs 260 Target Set by Analysts
Overview

Prabhudas Lilladher reiterated a 'Hold' recommendation on Wipro, setting a price target of Rs 260. While Q3 revenue growth met expectations, driven by deal ramp-ups, the brokerage flagged concerns regarding the sustainability of organic growth in Q4. Execution challenges on large deals and potential margin dilution from Harman integration loom, despite improved bookings for FY26.

Q3 Performance and Q4 Concerns

The brokerage cited mixed signals in Wipro's recent performance. Q3 revenue growth, at +1.4% quarter-on-quarter in constant currency, aligned with Prabhudas Lilladher's estimates. The successful ramp-up of the Phoenix deal and the integration of Harman were key contributors to this quarter's expansion.

Despite positive organic growth from its Financial Services segment and other business units, the momentum is unlikely to persist into the fourth quarter. Prabhudas Lilladher anticipates a slowdown due to the deferment of execution on a significant large deal, specifically the NN component. The brokerage's own Q4 organic guidance of -1.5% to +0.5% (CC) reflects this anticipated softness. This guidance suggests that inorganic contributions will need to provide a substantial boost of approximately +1.5% quarter-on-quarter to meet the overall forecast.

Deal Execution and Margin Outlook

While large deals secured in the first nine months of FY26 showed a significant year-on-year increase of 77%, with bookings up 25% YoY, the actual execution of these contracts remains a considerable challenge. On the profitability front, the full integration of Harman is expected to negatively impact Service margins in FY27. Investors will likely need to wait until FY28 to see the tangible benefits of this integration.

Financial Projections and Recommendation

Prabhudas Lilladher is projecting revenue growth of -1.3%, +3.8%, and +4.4% year-on-year in constant currency for FY26, FY27, and FY28, respectively. Adjusted IT Service margins are estimated at 17.4% for FY26, easing slightly to 17.1% in FY27, before recovering to 17.5% in FY28. The firm has assigned a target price of ₹260 for Wipro, derived by applying a 17x multiple to the estimated FY28 earnings per share. Based on these factors, the brokerage has chosen to retain its 'HOLD' recommendation on the stock.

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