Reduce MphasiS; target of Rs 376: Dolat Capital

“Mphasis declared Q3 results with 2% QoQ growth at Rs 13.5 bn driven by strong traction in direct business (up 6% in cc) and ‘appreciation gains of about 7%. PAT grew 10% QoQ at Rs 2.08bn slightly below our estimate of Rs 2.1bn. It added about 24 (20 in direct channel) new clients during the quarter. Revenues from HP slipped further by 2.3% QoQ (contributes about 55% of revenues) during the quarter; 6.2% in constant currency terms. Non-enterprise services revenues however grew by 16% QoQ at Rs 688mn; broadly inline with its guided run rate.”

“Direct sales grew 12.6% QoQ (5.8% in cc terms) with a runrate of about USD 112 quarterly run rate. It also managed its first licence sale for its wynsure platform for a TCV of USD 2.4mn-addinganother avenue for revenues.OPM grew 50bps QoQ despite salary hikes in the quarter at 16.7%. Mphasis is gaining on profitability owing to higher share of revenues from direct business but still its low considering the wide gains on currency tailwinds.”

“We believe the results were broadly inline as disappointment from HP business continues quarter after quarter and remains a major overhang on the stock. We believe that the interest in the stock would remain low despite economical valuation (9x on 1yr forward) owing to sustained uncertainty from business opportunity from HP (reported weak result and outlook). We maintain our cautious stance on the company with a target price of Rs 376,” says Dolat Capital research report.

Public holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.