Sell Mphasis; target of Rs 2,020: ICICI Securities

ICICI Securities is bearish on Mphasis has recommended sell rating on the stock with a target price of Rs 2,020 in its research report dated July 28, 2024.

Broker Research

August 06, 2024 / 12:24 IST

sell

ICICI Securitie's research report on Mphasis

Revenue was flattish with 0.1% QoQ cc decline, missing estimates of 1.8% QoQ growth. Furlough reversal benefits didn’t show in Q1 growth. Sharp decline of 13.3% on DXC contributed to sluggish growth. Lacklustre Direct segment was up by a muted 0.3% QoQ. The growth was driven by: Insurance (up 2.7% QoQ USD), banking capital markets (up 1.4%) and IT, CME (up 0.8%). The drag came from others (down by a sharp 7.8%) due to weakness in healthcare vertical.

Outlook

MPHL’s Q1FY25 growth missed our estimates with a marginal revenue decline of 0.1% cc. BFS turnaround did not materialise in this quarter as well, with just 1.4% growth QoQ, lower than even Q4FY24 print of 2.5%. Growth was primarily led by insurance (up 2.7% QoQ). Healthcare was a drag due to completion of projects in Q4 which weren’t replenished in Q1. In contrast, deal pipeline being robust at USD 319mn (up 80.2% QoQ) was a bright spot. EBIT margin was flat QoQ at 15%. Management has guided for FY25 EBIT margin at 14.6-16% and has indicated that deal conversion will pick-up in mid-late year deals. We tweak FY26-27E EPS downwards by 1.2% and revise our TP to INR 2,020 (vs INR 2,050 earlier) on a one-year forward target multiple of 18x. Reiterate SELL.

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