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Buy Mphasis; target of Rs 3200: Motilal Oswal

Motilal Oswal is bullish on Mphasis recommended buy rating on the stock with a target price of Rs 3200 in its research report dated April 29, 2022.

April 30, 2022 / 09:54 PM IST
The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

 
 
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Motilal Oswal's research report on Mphasis


MPHL's 4QFY22 performance was led by a 4.7% constant currency (CC) QoQ growth in the Direct business. DXC was marginally up (+1.1% QoQ CC) and now accounts for 5% of revenue (v/s 15.2% in FY21). The company reported a net new deal TCV of USD347m in 4QFY22. MPHL's Direct business has been consistently delivering exceptional growth, with a two-year CAGR of 26.1%, which is among the best in our coverage universe. With the management reiterating its industry-leading growth guidance in the Direct business, we expect standout growth to continue in this category (FY22-24E CAGR of 17.3%). MPHL should benefit from a growing deal pipeline (+16% YoY), and deal TCV (+42% YoY). It has also added ~1.7k employees and plans to ramp up fresher hiring level, which hints at good business visibility.



Outlook


The stock is currently trading at ~24x FY23E EPS. We value the stock at 28x FY24E EPS and maintain our BUY rating with a TP of INR3,200.

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first published: Apr 30, 2022 09:54 pm
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