Mphasis Q1 Results Review - Mixed Numbers; Margin Trajectory To Improve Hereon: Dolat Capital

Dolat Capital Report

Mphasis Ltd. reported revenue decline of 0.1% constant currency QoQ (our estimate: 2.1%) at $410 million, as Direct biz (96% of revenue) grew 0.3% QoQ. Operating profit margin stood at 15%, up 10 bps QoQ (our estimate: 14.8%) driven by operating efficiencies.

Management pointed tech spending remains a strategic priority of its clients, despite macro uncertainties. Additionally, the company also maintains better than industry growth stance for FY25. OPM guidance range is retained at 14.6%-16%, which we believe has upward bias as growth rate will likely improve in H2.

We revise our FY25/FY26E EPS estimate by 3.3%/5.3% baking in better execution on margin front. We believe growth to pick-up led by-

1. Volume uptick in mortgage,

2. Ramp-up in non-top 10, and

3. Increased focus on AI deals.

However, valuation are full and thus we revise our rating to ‘Reduce’ (earlier Accumulate) with target price of Rs 2,760 (at 26 times FY26E).

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