Prabhudas Lilladher recommended accumulate rating on Mphasis with a target price of Rs 1042 in its research report dated August 13, 2019.
Prabhudas Lilladher's research report on Mphasis
We attended Mpahsis analyst meet where the management highlighted the key growth drivers in direct core & new growth areas in the DXC/HP Channel. Mpahsis management mentioned that speed, flexibility, domain expertise, scalability, solution architecting, strong eco system of alliance partners is helping them to drive sustainable growth. Mpahsis has developed core capabilities in sub-verticals especially in BFSI, where regardless of industry weakness in the segment management maintains its strong outlook for the same. Mpahsis is more focused in wealth management & mortgage services in BFSI which is helping them to build digital inroads in this verticals. BFS accounts for 44.7% of Mphasis' revenues and is higher relative to peers. Management was quite confident of driving growth from new logos and wallet share gain in existing accounts. Further, Mphasis reported that it does not have a meaningful exposure to the capital markets segment. Also, management was confident on revenue uptick in Digital Risk. The segment can reach US$25-30 mn revenue band in FY2020E on ramp-up of deal wins. Revenue from new clients, largely BFSI-focused, grew 91% in FY2019 and 104% in 1QFY20 and is another growth driver.
We have fine tune our estimates & value Mphasis at 15x FY21E earnings to arrive at revised target price of Rs1042. The stock currently trades at attractive valuation of 14.8/12.7x FY20E/FY21E earnings.
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