Buy MPS; target of Rs 550: Dolat Capital Market
Dolat Capital Market is bullish on MPS has recommended buy rating on the stock with a target price of Rs 550 in its research report dated November 11, 2020.
November 17, 2020 / 05:01 PM IST
Dolat Capital Market's research report on MPS
MPS reported slight beat on results in Q2, with a 34.9% QoQ growth in revenue (our estm: 31.9% QoQ) largely led by inorganic contribution from acquired Highwire business while organic business biz segments remained in flat to slightly negative growth range. OPM declined 360bps QoQ to 17.0% (our estm: 15.0%) due to decline in margins of all 3 biz segments where-in Platform business was impacted by lower EBITDA margin of acquired Highwire Biz (early double digit). MPS expects Highwire business to deliver improved profitability (40-45% EBITDA margins) by end of FY22 led by cost take-outs (IT, Rent, Other inefficiencies), limited incremental cost for revenue growth (cross sell leverage) and cost arbitrage opportunities by off-shoring. Post Highwire integration, MPS would focus on revival of profitability across all business segments, that will drive overall earnings momentum which we believe is achievable given the past robust turn-around track record.
Improved business visibility, strong margin revival potential and attractive valuations, make strong investment case, we maintain our Buy rating with TP of Rs550, valued at 12x FY23 Earnings per share of Rs45.5.
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