Mphasis - Fundamentals weak, valuations unjustified; SELL - Kotak

Weak revenue growth outlook across channels drives a 1-2% cut in consol revenue estimates for the next two years. Decline in HP channel will continue, while underinvestment will hurt direct channel growth. Margins are unsustainable despite recent correction, given stretched operating metrics. We cut EPS estimates by 2% for the next two years. Valuations are expensive after sharp rally in the stock led by news of HP's potential stake sale.

We prefer valuing the company on fundamentals; retain SELL rating with an unchanged TP of Rs350.

Source : Equity Bulls

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