Mphasis - Revenue drag continues - Emkay

Reco: REDUCE
CMP: Rs 379
Target Price: Rs 375

- Mphasis's QJan'13 results continued the trend of pressure on revenues with revenues down by 4% QoQ as HP Channel revenues declined by 9% QoQ/23% YoY.

- EBITDA margins also slipped by ~220 bps sequentially to 18.5% (after improved through the past few qtrs) impacted adversely by lower utilization (on a/c of HP shutdowns)

- See pressure on op performance ahead from growth challenges and inability to protect margins (as co steps up S&M expenses to drive better traction in Direct Channel)

- Cut FY Oct'13/Oct'14E EPS lower by 7/1% each to Rs35/39. REDUCE, TP Rs 375 stays. Stepped up dividend payout limits sharp downside, however business remains challenged.

Source : Equity Bulls

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