Wipro shares has released their Q2’2021 result on yesterday (13.10.2020). The Wipro share price shed down 6.78% on the next day of the quarterly result. One of the largest IT company has registered a decline of 7.3% year on year in net dollar revenue.
The result has disappointed the brokerage analysts, who expected the revenue growth to spark around 1.5% to 3%. After these disappointments, investors will be pleased with,
- The net profit has shown a growth of 2.8% Q-o-Q.
- Shares buyback for Rs. 400 per share.
The company has completely invested its time and energy in digital transformation and agile adaptability. The 75 years old company has strongly looked into creating more patents year on year. Also, deep diving in bringing customer engagement strategies.
Let us take you through the deeper analysis of the company, which would spark the intent for investors and aspiring investors of Wipro shares
WIPRO SHARES – BUSINESS OVERVIEW:
From the FY2019-20, the company has started its strategic approach on “Digital First”. They have built the strategy on four pillars,
- Business Transformation.
- Connected Intelligence
With these strong pillars, the company is strengthening its presence on the upcoming and future-driven technologies. The company has a strong business impact for clients by deriving their services in
- Digital Strategy Advisory and Business process Services
- Customer-Centric Designs
- Technology Consulting
- IT Consulting
- Application design and development
- Re-engineering and Maintenance.
- System Integration
- Package Implementation.
- Global Infrastructure Services
- Cloud, mobility & Analytical Services
These services are offered to major industries like
- Business, Financial Services and Insurance (BFSI)
- Health Business Unit
- Consumer Business Unit
- Energy, Natural Resources, and Utilities
Apart from this, they have a strong presence in B2B business on technological solutions and products offering to other IT and related industries.
- IT products
- Cloud enterprise platform
- Cloud and infrastructure services
- Industrial and Engineering Services
- Data Analytics and Artificial Intelligence.
- Cyber Security and Risk Services.
- Digital Operation and Platforms
The company is investing its revenue in the Research and Development of new technologies. The R&D expenses are widely grown in the last two years. It has grown from 304.1 Cr in 2017 to 461.9 Cr in 2019 with a CAGR of 23.24% per annum
The number of patents is reasonably increasing from 2000+ in 2017 to 2300+ in 2019. The current attrition rate is 14.7% which has come down from 17.8% in the previous year.
Gender diversity is well maintained in the organization with 35% of women employees.
From a business perspective, the company is well planned for its future. Building strong fundamentals and portfolios which will be leading them in front. If not now, the company will tend to grow its revenue and asset in the future.
FINANCIAL PERFORMANCE – WIPRO SHARES:
Business without revenue growth will not bring any smile to investors. Come, let us have detailed analysis on financial aspect of the company.
The above image gives a clear picture of last 5 years and last two quarters financial performance. The parameters we will be looking at are Revenue, EBITDA, PAT, EPS.
- 5 years Revenue growth is 5.27%, which is lower than the industry average. The industry average is 9.83%
- EBITDA 5 years growth is at a CAGR of 3.4%. The EBITA has also shown a growth quarter on quarter.
- The 5 years PAT (Profit after Tax) is just at a CAGR of 2.35%. The industry average growth rate of PAT is at a CAGR of 8.06%
- In the last 5 year they have lost the market share from 15.5% to 12.68%. This has a huge impact in terms of financial performance.
Eventhough, the company has shown year on year growth (except this Q2’2021 vs Q2’2020), the growth on revenue and other financial parameters are very low.
But in the last 6 months the stock price has moved to 100% post COVID. That why we continously say there is no relation between business performance and share price.
As an intelligent investor, you should look at the business fundamentals and values ans not on share price.
Please have a look at TCS Shares Price Review by Fincareplan.
WIPRO SHARES – FUNDAMENTAL ANALYSIS:
Total number of Equity Shares: 571.29 Cr Shares
Market capital: 200109.35 Cr
Let us understand the fundamental analysis parameters.
- Book Value: Rs. 96.83 Cr
- Price to Book value (P/B): 3.61
- Earnings Per Share (TTM): 16.92
- Price to Earnings (P/E): 20.71 (Fair Price)
- Industry P/E: 27.76
- Dividend Yeild; 0.28% (Poor)
- Debt to Equity Ratio (D/E): 0.14
- Current ratio: 2.4
- Interest Coverage Ratio: 17.75
- Return on Equity (ROE): 17.57%
- Net Profit Margin: 15.22%
- Net Profit to Revenue: 15.22%
- Free Cash Flow: Rs. 7841.6
- Promoters – 75.89%
- FII – 8.66%
- DII – 9.3%
- Mutual Funds – 1.45%
- Insurance Company – 5%
- Financial Institutions – 0.72%
- Others – 2.13%
- Retail Investors – 6.15%
EXCESS LIQUID CASH PER SHARE:
- FIXED ASSET:
- Investments: Rs. 930.2 Cr
- Other Financial Asset: Rs. 672 Cr
- CURRENT ASSET:
- Investments: Rs. 25812.9 Cr
- Cash & Cash Equivalent: Rs. 14232.6 Cr
- Other Financial Assets: Rs. 1089.3 Cr
Total Liquid Assets: Rs. 42737 Cr
Total Liabilities: Rs. 25772.9 Cr
Excess Liquid Asset: Rs. 16964.1 Cr
Excess Liquid Cash Per Share: Rs. 29.69 per Share.
EPS (TTM): 16.92
5 Year EPS Growth: 5.15%
5 Years Revenue growth: 5.27%
1 Year EPS: 2.41%
1 Year revenue Growth: 3.62%
The Stock is 1.67 times more volatile than Nifty. So, we should consider Margin of safety (MOS) of min 10% to 20%
Considering, highest Growth of Revenue 5.27 as expected growth, EPS (TTM) of 16.92, the intrinsic value will be between,
Rs. 151.68 to Rs. 170.64 per share. Even at highest value, the share price is 105% overvalued
INSIGHTS FOR INVESTORS:
- The shares price is completely overvaued.
- You can’t invest in a share which price grows more than 100%, but revenue and EPS grows at 3-5% per year.
- Adopted to future technology is the only best advantage.
- The company has focused on reducing thier debts, and increased excess liquid cash per share.
- Even after the Q2’2021 result the share price has fell down 6.72% in a single day. Reality is, the share price has to be corrected in a huge way.
- Don’t invest in any share as the market booms on it. Understand the business, calculate the values and be concervative always