2025-11-16 17:48:09
Latest Post
Karnataka Bank appoints Veteran Banker Mr Raghavendra S Bhat as its New Managing Director & CEO
Websol signs MoU with Andhra Pradesh Economic Development Board
Sellwin Traders Ltd has signed MOU to acquire 36% Equity Stake in Kumkum Wellness
Western Carriers Reports Q2 & H1 FY26 Results
Lupin announces closure of Inspection by U.S. FDA at its Nagpur Unit-1 Facility with No Observations
Research
MphasiS - Muted HP channel puts pressure on growth; Downgrade to 'REDUCE'; TP Rs400 - PINC Research
Posted On : 2012-03-16 09:04:58( TIMEZONE : IST )
Q1FY12 Result Review - MphasiS
Muted HP channel puts pressure on growth
HP channel led to revenue decline - Revenue declined 3%QoQ to USD265.6mn, below expectation. Rupee revenue grew 4.1%QoQ to Rs13,672mn. HP channel revenue remained flattish in rupee terms with 58% contribution but direct channel revenue grew 14.4%QoQ with 42% contribution, up from 31% contribution from a year back. EBITDA margin expanded 57bpsQoQ to 18.4%, below our expectation. PAT was Rs1,848mn, 1%QoQ growth. EPS was Rs8.8, 1%QoQ growth.
Onsite pricing for Applications declines, stable for other towers - Onsite pricing for applications segment declined 2.9%QoQ to USD67/hr. All other pricing including offshore and onsite for Applications, ITO and BPO remained stable. The management expects no pressure from HP in terms of price negotiation. Overall pricing is also expected to be stable.
US and Europe decline - In dollar terms, America (65% contribution) declined 4.5%QoQ, Europe (15% contribution) declined 9.1%QoQ and Emerging Markets (20% contribution) grew 7.7%QoQ.
All service lines decline except IMS - In rupee terms, Application maintenance (32% contribution) grew 1.8%QoQ, application development (28% contribution) grew 4.6%QoQ, IMS (24% contribution) grew 11.9%. Technical help desk (5% contribution) declined 16%QoQ and customer service (5% contribution) declined 3.3%QoQ.
Employee headcount declines; robust new client addition - Total headcount declined 4%QoQ to 38,798. Utilisation (including trainees) for Application, BPO and ITO grew 100bpsQoQ each to 77%, 71% and 81% respectively. Added 28 new clients (17 from direct channel and 11 from HP channel). Top client declined 3%QoQ, top 10 clients declined 3%QoQ.
Outlook and Recommendation - Q1 financials are below expectations with higher than expected decline from HP. As HP is not performing well in its Enterprise Solutions segment, we expect pressure on revenue growth in MphasiS as well with a risk of pricing cut in future. The stock was at attractive valuations after the last quarter's earnings and it has given 37% absolute returns. We downgrade the recommendation from BUY to 'REDUCE' with a target price of Rs400 based on 10x PER multiple on 18-months forward earnings.
