Prabhudas Lilladher's research report on Mphasis
Strong revenue growth of 6% QoQ USD was driven by exceptional performance in Direct core business (+10% QoQ USD) partially offset continued decline in DXC (-18.3% QoQ USD). Revenue share of DXC has now declined to 9.2% (vs 20% in 1Q21). We believe that direct core business will deliver industry leading growth in FY22 (~28%) due to 1) sustained strong deal momentum with longer tenure and larger deal size (Net new TCV on TTM basis is up 62% YoY and for 1Q22 is 106% QoQ at $505) 2) robust broad-based pipeline, 3) market share gains driving consistent growth across client buckets (Top 10 clients grew 24% YoY and Top11-20 clients grew 19% YoY on TTM basis) and 4) Strong presence across sub-verticals in BCM industry (51% of revenue share, +9.2% QoQ USD in 1Q22 and 20% YoY on TTM basis).
We value Mphasis on Sep23 EPS (roll over) of INR 99 to arrive at a changed TP of INR 2,770 (earlier: 2,335). Mpahsis is currently trading at multiples of 32.2/27.6 on EPS of 78.6/91.7 on FY22/23 respectively. Mpahsis trades at 8%/10% discount to LTI//PSYS on FY23 P/E valuations. Maintain Buy.
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