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.
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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