Recommendation From IT Consulting and Cigarettes,Tobacco Products Sectors

The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations 

WIPRO 

CMP - Rs 359.50
BSE CODE 507685
Volume 112,242
Face Value Rs 2
Target Rs 405
Stoploss Rs 335 (CLS) 

Wipro is India’s leading software company. Wipro's IT services and consolidated revenue growth in Q3FY19 was in line with market expectations. The EBIT margins and EPS growth was a positive surprise this quarters and augurs well for the stock. The outlook and guidance for the coming quarter is positive. Amongst geographies, the US (57.1% of revenue) outperformed with 3.7 per cent QoQ growth in constant currency. Wipro has guided for Q4FY19 IT services revenue growth of 0% to 2%, which is a miss. Digital solutions continued to grow faster and constituted 33.2% of revenue in Q3FY19 vs. 31.4% of revenue in Q2. Wipro’s $50mn-plus clients grew by 2 QoQ to 41 and US$100mn-plus clients grew by 1 QoQ to 19. Q4FY19 IT services revenue growth guidance of 0% to 2% is a miss, especially given that it now does not include the India government and PSU business. The positive guidance and positive outlook for IT industry makes us recommend Wipro as BUY. 

GODFREY PHILIPS 

CMP - Rs 933.15
BSE CODE 500163
Volume 13,814
Face Value Rs 2
Target Rs 1010
Stoploss Rs 870 (CLS) 

Godfrey Phillips India (GPIL) is one of the largest players in the Indian cigarette industry and has two major stakeholders, the K. K. Modi Group and Philip Morris. The company operates in two segments: cigarettes and tobacco products, and tea and other retail products. Godfrey Phillips (GPIL) registered total revenue growth of 18.3% YoY to Rs 640.3cr., up by 6.1% QoQ. EBITDA margin improved by 490bps YoY to 21.3% in Q3FY14 owing to decline in input costs and jump in net revenue. PAT grew by 43.8% YoY to Rs. 70.7cr during Q3FY14. The strong revenue growth in cigarettes and tea and other retail segment saw an increase in total revenue by 18.3% YoY. The EBIT margin for cigarettes expanded by 500bps YoY. PAT grew by 44% YoY. On a trailing basis, GPIL is trading at a discount compared to ITC and VST by +50% and +17%, respectively. Based on the lower valuation, we recommend investors to BUY Godfrey Philips