Prabhudas Lilladher has given Buy recommendation for Mphasis with a target price of Rs. 3868 in its research report issued on Jan 21, 2022

Prabhudas Lilladher’s research report on Mphasis

Strong beat on revenue growth, 7.5% QoQ USD (Ple: 5.4%, 6%) was led by strong growth in Direct business (~8.7% QoQ USD, 9% QoQ CC) while DXC continued to decline (-10.5% QoQ USD, -10.4% QoQ CC). Blink acquisition contributed USD 9 mn implying overall organic revenue growth of 5.1% QoQ USD. Growth was strong across all verticals led by BCM (55% of revenue, 8.9% QoQ USD in Q3, 24% YoY in YTD FY22) aided market share gains. MPHL reported strong growth in new TCV wins $335 mn 39% QoQ, 35% YoY in Q3 and $1.08 bn, 25% YoY in 9MFY22. Despite strong bookings deal pipeline is up 7% QoQ and 10% YoY. Proactive new deal hunting has led to impressive four large deal wins for the company unlike small size short cycle deal wins by mid-cap peers. LTM average deal size has also consistently increased ($71 mn in 3Q22 vs $ 67 mn in 3Q21 and $31 mn in 3Q20).

Outlook

Our EPS estimates increase by 2.7%/2.2% for FY23/24 led by increase in revenue estimates. We arrive at DCF based TP of Rs. 3868, earlier Rs. 3772 (implied target multiple of 35x on FY24 EPS). Mpahsis is currently trading at multiples of 32x/27x on FY23/24 EPS of 95/112 respectively with Revenue/EPS CAGR of 17%/21% over FY22-24E. Maintain Buy.

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