Mphasis shares: Target price raised — rationale behind 'Buy' call

Mphasis Ltd shares are in focus after Nuvama Institutional Equities retained its 'Buy' rating on the IT stock and raised the target price following the company's Q4 FY26 performance. The brokerage highlighted that the company delivered a steady set of numbers, with growth slightly ahead of expectations and margins holding firm.

"Revenue grew 2.5 per cent in constant currency (CC) QoQ and 7.1 per cent CC YoY to $462 million, slightly above our estimate of 2.3 per cent CC QoQ. EBIT margin expanded 20 basis points (bps) QoQ to 15.4 per cent, in line with our estimate. TCV remained stable at $407 million (down 5 per cent QoQ, up 4 per cent YoY). Management has guided for high-single to low-double-digit growth in FY27," Nuvama said.

The brokerage believes the company's execution is now catching up with its strong deal pipeline. "After three quarters of strong deal wins, Mphasis has finally delivered on the revenue front with solid QoQ and YoY growth. A strong exit rate and record deal wins in FY26 provide a solid platform to accelerate in FY27," it noted.

Factoring in currency assumptions, Nuvama has slightly upgraded its earnings estimates. "We are revising our FY27E and FY28E EPS estimates upward by 2.9 per cent and 3.4 per cent, respectively, as we update our USD/INR assumption to 93 from 88," it added.

The brokerage has maintained its positive stance on valuation as well. "We retain our 'Buy' rating with a revised target price of Rs 3,200 (earlier Rs 3,100), valuing the stock at 25x FY28E P/E. The stock currently trades at 20x FY28E P/E," Nuvama further said.

Meanwhile, Mphasis shares settled 1.17 per cent higher at Rs 2,275 on Thursday. Domestic benchmarks are closed on Friday due to 'Maharashtra Day'.