MphasiS falls 2%; Goldman Sachs cuts target, EPS forecast

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26 Aug, 2025 12:21

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Shares of MphasiS erased early gains, falling more than 2 percent intraday Tuesday. Brokerage Goldman Sachs slashed target price on the stock to Rs 360 from Rs 390 earlier, citing lower revenue.

The brokerage cut its earnings per share forecasts for FY15E-FY17E by 2-9 percent on the back of weak enterprise services revenue growth (down 6.9 percent Y-o-Y) registered by its largest client, Hewlett-Packard in Q4 2014, HP’s most recent reported quarter.

Goldman maintains neutral rating  as it believes that despite weak fundamentals, the high dividend yield of 6 percent (FY16E) provides support to valuation.

According to the report, revival of HP business will provide upside to the stock while decline in direct channel will push the stock down.

After an interaction with the software services provider, the brokerage expects revenue from the HP channel, which has declined from 65 percent of total revenues in FY11 to 36 percent in Q2FY15, is likely to continue.

Further, Goldman believes HP’s recent announcement to separate its enterprise business into a separate company adds to uncertainty about the channel’s existing revenues. "On the direct channel, we believe the digital risk business may continue to face pressure due to a weak US mortgage market.

The management maintained its 13-15 percent EBIT margin band for FY15. However, the brokerage estimates the Q3 wage hike and above average utilization rate (76 percent in Q2 versus 74 percent 5 year average) pose downside risks to EBIT margins.

At 10:55 hours IST, the stock was quoting at Rs 346.25, down Rs 3.20, or 0.92 percent on the BSE.

Posted by Sunil Shankar Matkar