Buy Mphasis; target of Rs 930: ICICI Direct

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ICICI Direct's research report on Mphasis

Mphasis reported a healthy set of Q4FY20 numbers. The company reported 1.5% QoQ growth in revenue in constant currency mainly led by 2.7% QoQ growth in direct international business partly offset by 1% QoQ fall in HP/DXC channel. Operating margin rose 10 bps to 16.3% while operating profit rose 3.7% QoQ. Net profit grew 20.3% QoQ to Rs 353 crore, mainly led by lower tax and higher other income. The company declared a dividend of Rs 35/share. Mphasis has won $201 million of TCV in direct international of which 79% of deal wins is in new generation services business.

Outlook

As most deal wins by the company have higher proportion of digital business, we expect accelerated growth in medium term. Further, healthy balance sheet could help the company in inorganic revenue growth opportunities. This coupled with healthy capital allocation prompt us to upgrade the stock from HOLD to BUY with a revised target price of Rs 930 (13x FY22E EPS).

For all recommendations report, click here

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