This Large Cap IT Stock Gets Buy Call, Delivered Multibagger Returns In 5 Years, Buy For 15% Gains

Brokerage Firm Hem Securities in its recent report has initiated a "Buy" rating to Mphasis Ltd. for a target price of Rs 2323. The brokerage sees potential gains of 15% considering the estimated target price and the current market price (CMP) of the stock. It is a large cap Information Technology (IT) Sector company engaged in having a market capitalization of Rs 37,981.26 crore. Mphasis is a global IT solutions provider specializing in providing cloud and cognitive services, applies next-generation technology to help enterprises transform businesses globally.

Stock Outlook

The current market price of the stock is Rs 2,019.45 apiece. The 52 week high of the stock is Rs 3,659.75.The stock recently hit the 52 week low at Rs 1,991.10, currently trading near 52 week low.

 

Returns of Investment

The stocks has given 10.84% negative return in the past 1 months and 12.61% in the past 3 months, whereas in the past 1 year has given 39.51% negative return. In the past 3 years, the stock gave 37.4% positive return and 228.53% multibagger return the past 5 years.

 

Results Overview

• Mphasis Ltd Q1 FY23 consolidated revenues came in at Rs 3411 Cr, up 26.77% YoY and up 4.08% QoQ.
• Op Profit for Q1FY23 stood at Rs 600 Cr, up 22.62% YoY and up 3.96% QoQ.
• Op margins for Q1FY23 came at 17.59%, -60bps YoY and -2 bps QoQ.
• PAT for Q1FY23 stood at Rs 401.87 Cr, up 18.31% YoY and up 2.50% QoQ.

Management Commentary

Management mentioned that company has healthy deal pipeline. Management continues to focus on hiring freshers for FY23. Direct business will continue to drive the growth of the company led by robust deal wins in New Gen areas. Management believes more cross selling opportunities from M&A will help the company to achieve industry leading growth in FY23. Management expects tech spends to remain robust. Management continues to remain confident of sustaining margins in a range of 15.25% to 17%.

Segmental Analysis

Q1FY23 Revenue Breakup: Banking & Financial Services (53.4%), Insurance (8.9%), Technology Media & Telecommunication (13.4%), Logistics & Transportation (13.0%), Others (11.4%). Q1FY23 Geographical Revenue Breakup: Americas (82.3%), EMEA (9.7%), India (5.0%), ROW (2.9%). In Q1 FY23, the revenue from direct segment was $408 million, +26% YoY. Revenue from DXC Technology was $21 million, -38% YoY.

Concall Summary

New TCV wins of $302 Mn in Q1FY23, ~84% of Q1-23 deal wins in New Gen areas. Consistently maintaining average of > $300M+ TCV wins in the past eight quarters. Blink is seeing decent growth with good synergy benefits. Revenue from top client is 11%, top 5 clients is 45% & top 10 clients is 60%. Company won 7 new clients QoQ in Q1FY23. In Q1FY23 headcount increased 17% YoY to 36,899. Management believes that attrition rate is still at elevated levels but it is gradually stabilizing now.

Other Development

Continued share gains with key clients; Strong Top-5/Top-10/Top-20 client LTM growth. Ongoing utilization & capacity management (using the pyramid) aligns with demand visibility and in line with company's strategy of continued supply side transformation.

Valuation & Outlook

Robust demand environment and healthy deal pipeline would drive Mphasis's next phase of growth. "We believe company will continue to perform well over next few quarters due to strong deal win momentum. Also the confident commentary from management, declining revenue share of DXC and increase in average LTM size are other positive triggers for the stock. We initiate a "BUY" rating on the stock and value the stock at 21.9x FY24E earnings to arrive at the target of Rs 2323," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Hem Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.