Buy Mphasis; target of Rs 725: Motilal Oswal

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Motilal Oswal Financial Services is bullish on Mphasis and has recommended buy rating on the stock with a 12-month target of Rs 725, in its November 25, 2009 research report.

"Revenue was Rs 11.3 billion, up 2.4% QoQ, EBITDA margin was 26% (v/s our estimate of 26.8%) and PAT was Rs 2.44 billion. Mphasis' revenue growth was muted due to lower billing days (four extra holidays) in 4QFY09, pricing pressure in BPO and moderation of growth in the ITO business. This was countered by improved utilization in service lines, SGA leverage, product license sales (Rs 93 million) and forex gains in revenue (Rs 106 million). The stock trades at a P/E of 14.1x FY10E and 13.4x FY11E. We maintain Buy, with a 12-month target price of Rs 725, based on 14.5x FY11E earnings, in line with its five-year average valuations,"says Motilal Oswal research report.

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