Mphasis - Inline operating performance with broadly stable margin - YES Securities

Our view

Overall, the revenue and EBIT margin for the quarter was broadly inline. The Direct segment has been driving the revenue growth, while DXC segment revenue has stabilized at mid-single digit percentage in terms of revenue contribution. Deal booking remains robust which provides strong revenue growth visibility. Certain costs related to travel and admin are expected to increase as IT companies switch to hybrid mode of working. While the attrition remains high, we expect it to maintain broadly stable margin over medium term led by improving employee pyramid and positive operating leverage. We estimate revenue CAGR of 16.5% over FY22-FY24E with average EBIT margin of 16.6%

The stock trades at PER of 25.9x on FY24E EPS. We maintain ADD Rating on the stock and value it at 28x on FY24E earnings, arriving at target price of Rs 3,078/share

Result Highlights

- Reported revenue of Rs 32.8bn( up 4.9% QoQ, up 29.8% YoY). The growth was led by Insurance vertical( up 13.7% QoQ) and Logistics and Transportation( up 6.1% QoQ).

- DXC grew 1.6% QoQ( 5% of revenue), Direct International grew 5.2% QoQ( 93% of revenue); while others segment was down 3.9% QoQ( 2% of revenue).

- EBIT margin increased by 11 bps QoQ to 15.2%, led by continued focus on operational efficiency

- Offshore revenue mix grew by 1 percentage point QoQ to 42% for Q4FY22

- Added 6 clients in the quarter compared to 7 in Q3FY22.

- Total headcount increased by 1,619( 4.6% of Q3FY22 employee base). Including trainees, onsite utilization was flat QoQ at 89%; while offshore utilization was down 2pp QoQ to 77%

- Cash and equivalents at Rs 27.8bn compared to Rs 24.4bn as of Q3FY22

- DSO increased by 2 days QoQ to 61 days(within comfortable range)

Shares of MphasiS Limited was last trading in BSE at Rs. 2740.90 as compared to the previous close of Rs. 2842.20. The total number of shares traded during the day was 13566 in over 1268 trades.

The stock hit an intraday high of Rs. 2823.60 and intraday low of 2732.50. The net turnover during the day was Rs. 37470128.00.

Source : Equity Bulls

Keywords

Mphasis INE356A01018 ResultUpdate YESSecurities