Mphasis shares: FY27 guidance maintained; brokerages keep 'Buy' after Q1; check target price

Mphasis Ltd maintained its high-single to low-double digit growth guidance for FY27, with select brokerages reiterating their positive stance after the IT services company's June quarter (Q1 FY27) results.

Nuvama Institutional Equities noted that Mphasis reported revenue of $471 million in Q1, up 2.1 per cent quarter-on-quarter (QoQ) and 8.3 per cent year-on-year (YoY) in constant currency (CC), broadly in line with estimates.

"EBIT margins came in at 14.8 per cent, down 60 basis points QoQ, slightly below estimates of 15.1 per cent. TCV was strong again at $461 million (+13 per cent QoQ/-39 per cent YoY)," the brokerage said.

Nuvama highlighted that Mphasis has delivered strong deal wins over the past five quarters, supporting confidence in its growth outlook.

"Mphasis has consistently reported strong deal-wins for the last five quarters, providing confidence on the growth momentum — reflected in the incremental Q2 guidance given by management too," it said.

The brokerage retained its 'Buy' rating and an unchanged 12-month target price of Rs 3,200.

"Retain 'BUY' with a TP of INR3,200 (unchanged), valuing it at 25x FY28E PE. The stock currently trades at 17x FY28E PE," Nuvama stated.

Elara Capital said Mphasis' Q1 revenue performance was largely in line with estimates, although margins came in below expectations.

The brokerage noted that the Banking & Financial Services (BFS) segment may have seen sequential moderation, but continued to report strong higher single-digit growth on a YoY basis, supported by wallet share gains and growth in new accounts.

It added that the Insurance business also reported sequential weakness but maintained strong mid-teen YoY growth. According to Elara, growth moderated due to the completion of certain projects after a strong base.

"The company's pipeline grew 2.8x since Q2 FY24, while the order book continues to be healthy (above $400 million in the past five consecutive quarters; LTM order book now at $1.8 billion). The healthy growth in pipeline with strong order book is likely to enable strong revenue visibility," Elara said.

The brokerage maintained its 'Buy' call while lowering its target price to Rs 2,740 from Rs 2,845.

Meanwhile, Mphasis shares rose 1.88 per cent to close at Rs 2,274.15 on Friday.