Anand Rathi has given Buy recommendation for Mphasis with a target price of Rs. 3740 in its research report issued on Sep 23, 2021
Anand Rathi’s research report on Mphasis
Mphasis acquired Seattle-based Blink UX for $94m plus retention-payouts over the next two years. Founded in 2000, Blink is into customer research, user design and customer experience, essentially strengthening Mphasis’ value proposition in engineering/product design and in customer-facing industries such as BFSI. It brings a reputed set of clients (leaders across sectors) with whom it shares long-tenured relations. Margins take a hit over the next two years but expect stabilisation thereafter. No change in overall margin guidance band despite the acquisition. We maintain a Buy.
The acquisition is consistent with both Mphasis’ strategy and size (Blink is <3% of revenue, profitable). Revised estimates reflect higher D&A, lower other income, and retention payouts. In exchange, new clients and new services open up for Mphasis, offering longer growth potential. Reflecting this, we raise our target to Rs3,740, at 45x FY23 (from 35x earlier).