Mphasis - March 2013 Results Preview - Motilal Oswal

- For Mphasis, integration of Digital Risk acquisition will reflect in this quarter, as a result of which, sequential revenue growth should see a spike. We model revenue at USD272.6m, which implies QoQ growth of 15.2%.

- We expect almost all the incremental revenue during the quarter to emanate from acquisition of Digital Risk LLC, as on the organic front, we expect growth in the direct channel to be offset by continued decline in HP channel.

- In rupee terms, we expect revenue at INR14.5b, +15% QoQ. We expect forex losses of INR304m in the top line during the quarter.

- EBITDA margin is expected to decline 60bp QoQ to 17.9%, primarily on account of integration with the lower margin acquisition. In absolute terms, we expect EBITDA to grow 11.6% QoQ to INR2.6b.

- However, we expect PAT to decline by 1.9% QoQ to INR1.81b, as we model lower other income from the reduced cash kitty, post the payout for Digital Risk's acquisition. Our PAT margin estimate is 12.5%, down 220bp QoQ.

- The stock trades at 10.9x FY13E and 9.8x FY14E EPS. Maintain Sell.

Source : Equity Bulls

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