Prabhudas Lilladher recommended accumulate rating on Mphasis with a target price of Rs 1111 in its research report dated May 29, 2019.
Prabhudas Lilladher's research report on Mphasis
Mphasis posted inline revenue growth, good traction across HP channels & Direct channels & healthy deal wins led to our earnings estimate to increase by ~3% in FY20E/21E. HP channel has shown strong performance in FY18/FY19 & contribution of HP channel now accounts to 28.4% of the total revenues. Revenue growth has been improving & grew 13% in FY19. Deal wins have been going strong for MPHL with wins totaling USD616 mn in FY19, up 12% YoY. Good growth in the core business and growing revenue contribution from the Blackstone portfolio provide visibility on growth. We expect Mpahsis to post 11.7/11.5% growth in revenues for FY20E/21E & our EBIT margin estimates stands at ~16.6% for FY20E/21E. We believe recovery in digital business will be gradual while direct core business will be the key growth driver.
We value Mphasis at 15x FY21E earnings to arrive at revised target price of Rs1111. The stock currently trades at attractive valuation of 14.7/12.9x FY20E/FY21E earnings.
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