Motilal Oswal has given Buy recommendation for Mphasis recommended buy rating on the stock with a target price of Rs 2430 in its research re with a target price of Rs. 2430 in its research report issued on Oct 21, 2022
Motilal Oswal’s research report on Mphasis
MPHL’s 2QFY23 performance was led by a 2% CC QoQ growth in the Direct business and a 1% QoQ CC growth in DXC. Deal momentum remained intact with a strong net new TCV of USD302m. It also reported two large deal wins (USD110m) in 2QFY23. MPHL’s Direct business continued to be adversely impacted by the slowdown in its mortgage processing business, due to elevated interest rates. Additionally, it was negatively impacted by unexpected furloughs from client-specific issues. While we expect the drag in its mortgage business to continue given the unfavorable interest rate environment, it has good consolidation opportunities and should see strong growth once macro headwinds subside. With both DR and DXC verticals (10%+ of revenues) declining in the near term, we expect the revenue growth for MPHL to moderate to mid-teens in FY23 despite a strong demand momentum in the rest of Direct business.
We have largely maintained our estimates for FY23/24. Given MPHL’s strong Digital capabilities and client relationships, it is well-positioned to be a key beneficiary in the current context. Our TP of INR 2,430 implies 22x FY24E EPS. We reiterate our Buy rating on the stock.