Broker’s call: Mphasis – The Hindu BusinessLine

Target: ₹2,800

CMP: ₹2,220.75

We chatted with Mr. Manish Dugar, CFO, to know his outlook on the demand environment, revenue growth and margin outlook.

Deal winning momentum, deal pipeline buildup and client interactions remain stable. The company highlighted pockets of weaknesses — mortgages, spending delays on Horizon-3 initiatives, and furloughs announced by some customers — that could weigh on near-term growth.

A focus on active big deal origination, continued expansion of competencies, customer mining, new logo addition, and consistent growth in deal size and tenure resulted in healthy deal TCV wins and revenue conversion. The company expects Q2 growth to be better than Q1.

Mphasis is confident of delivering EBITM within the prescribed range of 15.25-17 per cent for FY23. EBITM stood at 15.3 per cent in Q1 and is expected to remain stable with an upward bias, given better utilisation, offshore turnaround, flat pyramid, pricing advantage and lower ESOP charges.

Weakness in mortgage business and holiday in some accounts could weigh on revenue growth in the near term. We maintain Buy with a target price of ₹2,800 on 25x Jun’24E EPS, given the continued growth in wallet share and steady expansion into addressable markets with capability building.

Published on

24 August 2022


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