Hold Mphasis – TP Rs.360 - Geojit BNP Paribas

- 2QFY12 (year end in October) revenue missed market expectations.

- However, EBITDA margin improved 120 bps to 19.7%, largely on continued head count reduction, which declined by 1619 qoq and higher utilization rates.

- These two helped the EPS in line with market estimates.

- Direct channel sales declined 3.2% qoq on lumpy license sales, but the management expects that it would grow above industry average in 2HFY12.

- HPES revenue declined 4% qoq and this would continue to decline further, dragging overall growth.

- There is nothing exciting about Mphasis in the near term. However, lower valuation of the stock and high net cash balances (about 26% of market cap) are positives.

- Retain 'hold' rating on the stock.

Source : Equity Bulls

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