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Mphasis share falls 3% post Q4 earnings, here's what brokerages say

The share has gained 107 per cent in one year and risen 14 per cent since the beginning of this year

twitter-logoBusinessToday.In | May 17, 2021 | Updated 14:28 IST
The share has gained 107% in one year and risen 14% since the beginning of this year.
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Mphasis share slipped 3 per cent today to hit an intraday low of Rs 1729.15 after the firm reported a 10.2 per cent year-on-year decline in net profit to Rs 316.9 crore for the quarter ended March 31.

The stock opened 0.75 per cent lower at Rs 1775.45 against the previous close of Rs 1788.95. Mphasis share trades higher than 50 day, 100 day and 200 day moving averages but lower than 5 day 10 day and 20 day moving averages. The share has gained 107 per cent in one year and risen 14 per cent since the beginning of this year. Market cap of the firm fell to Rs 32,746.49 crore.

"Mphasis has recorded the highest ever TCV wins in Direct of USD 1,112 million and our Direct Business growth of 22.5% on a reported basis, was a historical high. Our engineering-led DNA and client centricity has helped us stay consistent with our performance and we continue to invest in accelerating our targeted go-to-market and delivery guilds," said Nitin Rakesh, Chief Executive Officer, and Executive Director, Mphasis.

ICICI Securities said, "The company's strategy to mine top10/20 clients and adding high potential new logos bodes well for growth in direct channel. This coupled with management stability, improving deal size, market share gains via vendor consolidation, low legacy exposure, exposure to lesser impacted vertical and healthy margins prompt us to be positive on the stock from a long term perspective."

"However, run up in price and uncertainty on DXC revenues prompt us to downgrade the stock from BUY to HOLD with a target price of Rs 2,030," the brokerage added.

"We prune FY22/FY23 EPS estimates by 1%/2% to accommodate MPHL's Q4FY21 performance. On rolling valuations forward, we have a revised Mar'22 target price of Rs 1,580 (Rs 1,550 earlier), based on an unchanged one-year forward P/E multiple of 17x, which is one standard deviation over the last fiveyear average," said BOB Capital Markets.

"We believe it will be hard to replace this revenue stream fully in the near term despite strong deal wins in the direct channel. Our estimates build in a best-case EBIT margin of 17% in FY22 and 21% YoY growth for the direct channel vs. 17 per cent growth in FY21," it added.

Mphasis share touched an intraday high of Rs 1,805 on April 26th, 2021 after private equity firm Blackstone committed up to $2.8 billion to acquire a controlling stake in the company. The share touched a 52-week high of Rs 1,883.20 on May 7, 2021, and 52-week low of Rs 797.25 on May 18, 2020.

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