Buy Mphasis; target of Rs 1220: Dolat Capital
Dolat Capital’s research report on Mphasis
Annual Report highlights several key achievements of Mphasis in FY19. Firstly, it has reported 13% growth in revenues in US$ terms (first double digit growth in 10 years) as it turned its weakness into opportunity (HP/DXC channel revenues grew 22.9% YoY in cc terms in FY19 despite concerns around MSA limitations and DXC’s acquisition of Luxoft). The profitability improved by 100bps as was guided and led to over 30% growth in EPS/FCF for the year. During the year the company rewarded its shareholder with dividend/buyback almost 8% of its market cap. Blackstone (Promoters) also did a share sale of about 8% of the company at Rs960 per share during the year. After concluding robust performance for the year, the commentary continues to remain healthy for FY20 backed by sustained momentum across segment as evident in robust TCV signings (US$ 631mn up 14% YoY).
We continue to maintain Mphasis as our top pick among the mid-tier names with a Buy rating and TP of Rs1,220 (valued at 17x FY21e earnings).
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