Share price of mid-cap IT firm Mphasis gained around 2 percent on April 28 despite reporting a weak performance for the fourth quarter and missing the Street expectations.
The company’s net profit declined 1.7 percent on-year but shot off 3.4 percent sequentially to Rs 405 crore for the quarter ended March 2023. Profit was expected to come in at Rs 411 crore, according to a CNBC TV-18 poll.
The company's revenue declined 4.14 percent to Rs 3,361 crore from Rs 3,506 crore reported in the December 2022 quarter. It increased 2.5 percent on a yearly basis. In constant currency (cc) terms, the company reported a revenue decline of 4.5 percent YoY and 3.1 percent QoQ.
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“The macro-economic environment remains uncertain while we continue to look for alignment with our client’s current priorities. Strategic technology spending may have slowed down, however, hasn’t been paused. Enterprises continue to invest in cloud, digital transformation, and consolidation priorities. Institutionalising cost transformation projects is enabling them free up working capital," said Nitin Rakesh, CEO and MD of Mphasis.
Earnings before interest and taxes (EBIT) declined 3.05 percent to Rs 575 crore from Rs 593 crore in Q3FY22. EBIT margin came in at 17.11 percent as against 16.92 reported in the December 2022 quarter. Deal wins stood at $309 million compared to a four-quarter average of $338 million.
The board has also recommended a dividend of Rs 50 per share for FY23, subject to shareholder approval.
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For its FY24 outlook, the company expects a strong pipeline entering FY24, led by cloud, transformation and consolidation. It sees softness in the BFS (banking and financial services) segment in Q1FY24. Growth in direct is likely to be back-ended with expected strong sequential growth starting Q2FY24 and YoY growth increase through Q4FY24. Mortgage segment is close to bottoming out, the company said and expects incremental stability in mortgage through much of FY24.
It is targeting an operating (EBIT) margin band of 15.25-16.25 percent through all four quarters of FY24.
Market cap of Mphasis has declined over 35 percent in the last one year. The stock has 19 ‘buy’, 11 'hold’ and six ‘sell’ calls with an average 12-month target price at Rs 2,062.7, as per Bloomberg data.
At 12.45pm, the scrip was trading 1.79 percent higher on the NSE at Rs 1,816 with the benchmark Nifty IT trading 1.29 percent up at 27,708.15 points.
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