Buy Mphasis; target of Rs 2860: Prabhudas Lilladher

Prabhudas Lilladher's research report on Mphasis

The revenue growth performance (+2.9% QoQ CC) exceeded our estimates (+2.5% QoQ CC). ~80% of its portfolio mix maintained a steady state, while the rest of its business mix (L&T and Others) reported a decline of 8% and 3% QoQ, respectively. The continued improvement in large deal wins (13 large deals in FY25) and meaningful conversion of those deals are supporting the growth within BFSI. Despite having booked record high deal TCV of USD390m (11% QoQ), the deal funnel still looks encouraging (26% QoQ and 86% YoY). Even BFS pipeline remains strong at 70% YoY that comes at the back of 58% YoY and 43% YoY recorded in Q3 and Q2, respectively. More importantly, the conversion rate from TCV to revenue is notable for MPHL, evident through sequential performance, which has been missing across its close peers despite having booked robust deal TCVs in earlier timeframe.

Outlook

We are baking in revenue growth of 5.5%/7.1% YoY CC with EBIT margin of 15.4%/15.7% for FY26E/FY27.