Wipro results inline – Citi, Kotak

Wipro’s results for Q4FY08 were in line with expectations. Global IT services & products revenues grew 6% in INR terms. This was mostly volume-led.EBIDTA margins in the global IT business were lower predominantly due to on-site salary hikes. The management has re-iterated continuing traction with marginal impact of the US sub-prime issue, as yet. This indicates flat to marginally higher client budgets but increasing traction and preference for offshoring.

The current uncertainties relating to budget allocations will keep near term
growth muted but expect growth to pick up in H2FY09. Kotak expects PAT to grow to about Rs.39.5 bn in FY09; an EPS of about Rs.27. The rupee has been assumed to appreciate to Rs.38.50 per US dollar by FY09 end. Kotak recommends a BUY on Wipro with a price target of Rs.522,implying a P/E of 19.5x on our FY09E earnings estimates.