The companys service offerings include business

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Unformatted text preview: tal liabilities Shareholders' equity Minorities Total shareholders' equity Net debt 16E Sales growth (%) DB EPS growth (%) EBITDA Margin (%) EBIT Margin (%) Payout ratio (%) ROE (%) Capex/sales (%) Capex/depreciation (x) Net debt/equity (%) Net interest cover (x) Source: Company data, Deutsche Bank estimates Net interest cover (RHS) Aniruddha Bhosale +91 22 7180 4037 aniruddha.bhosale@db.com Deutsche Bank AG/Hong Kong Page 25 7 January 2014 Software & Services Indian IT Services Rating Company Price at 6 Jan 2014 (INR) 558.05 Buy Wipro Price target - 12mth (INR) 650.00 52-week range (INR) 559.05 - 325.60 BSE 30 Asia India 20,851 Aniruddha Bhosale Technology Reuters Bloomberg Software & Services WIPR.BO WPRO IN Research Analyst (+91) 22 7180 4037 aniruddha.bhosale@db.com Price/price relative Attractive valuations; Buy Continue to prefer Wipro over Infosys on attractive valuations We believe the improved IT spending outlook for CY13E should help laggards like Wipro and Infosys. Although we forecast both Wipro and Infosys to report a 4-4.4% CQGR in USD revenue over FY15E, we maintain a positive bias for Wipro over Infosys. We believe that despite a superior earnings growth forecast (17.7% CAGR vs. 15.8% for Infosys over FY14-16E), Wipro trades at ~12% discount to Infosys’ one-year forward P/E multiple. As Wipro’s operating performance improves in FY14E, we expect this discount to reverse. Retaining Buy with a target price of INR650. Key concern: customers continue to question Wipro’s delivery quality Under the leadership of TK Kurian and based on its new organizational structure, Wipro is trying to make the transition from being a vendor that merely provides labor arbitrage to one that adds value. However, Wipro’s transition has been sluggish. Our channel checks suggest that customers continue to question Wipro’s delivery quality versus other Indian and MNC vendors. This, in our view, is the biggest concern, and has elongated the business recovery for the compan...
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