Neutral Mphasis; target of Rs 3400: Motilal Oswal

Motilal Oswal's research report on Mphasis

Mphasis (MPHL)’s 2QFY25 revenue was 2.5% QoQ in Constant Currency (CC), which was above our estimate (+2 % QoQ CC). Direct business grew 2.4%/6.2% QoQ/YoY in CC, aided by TMT and BFS. The Total Contract Value (TCV) was down 35% QoQ to USD207m. EBIT margin stood at 15.4%, beating our estimate by 10bp QoQ. PAT came in at INR4.2b (up 4.7% QoQ), led by lower depreciation and employee costs. For 1HFY25, net revenue/EBIT/PAT grew 6.6%/5.1%/5.1% compared to 1HFY24. MPHL targets a sustainable operating (EBIT) margin within the stated band of 14.6%-16%.

Outlook

We raise our target multiple to 30x Sep’26E EPS. Our TP of INR3,400 implies an 11% upside. We reiterate our Neutral rating on the stock.