Hold Mphasis; target of Rs 2382: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Mphasis

Mphasis reported miss on revenue growth of 2% QoQ CC (Ple: 3%). Soft revenue growth was due to slowdown in mortgage business and decline in Insurance vertical (-6.1% QoQ USD). Direct business grew 2.4% QoQ CC, while DXC continued to decline -4.4% QoQ CC. Deal TCV was modest at $302mn (-13% QoQ, -40.2% YoY). Company also won $60mn cloud transformation deal from one of the top clients in July-22 (not included in Q1 TCV). Management mentioned that pipeline is strong (6% QoQ, 10% YoY) and growth is expected to accelerate in rest of the year. Margins were resilient at 15.3%, 10bps QoQ despite ongoing supply side pressures. Utilization (excluding trainees) dipped by 300bps QoQ to 74% and is expected to improve in coming quarters. We expect margins to remain near lower end of guidance and model 15.2% EBIT margin for FY23. Our EPS estimates decrease by 1%/2% led by cut in revenue estimates due to miss in Q1 revenue and some exposure (not significant) to mortgage and capital markets business, which are likely to be impacted by worsening macro environment.

Outlook

We continue to value Mphasis on 23x (FY24 EPS) to arrive at TP of Rs. 2382. Mpahsis is currently trading at 25x/22x on FY23/24 EPS of 89/104 respectively with Revenue/EPS CAGR of 14%/16% over FY22-24E. Maintain ‘Hold’.

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Mphasis - 250722 -prabhu