MPS Q2 Results Review - Miss On Modest Quarterly Performance; H2 Expected To Be Robust: Dolat Capital

Dolat Capital Report

MPS Ltd. reported revenue de-growth of 2.2% (our estimate: +3.7%) largely due to weakness across all segments. Content business/ platform business/ e-Learning saw revenue decline of 3.9%/2.1%/1.2% on QoQ basis.

Operating margins contracted by 43 basis points QoQ at 27.8% due to revenue decline. Segmental contraction majorly led by content biz, operating profit margin down by 130 basis points QoQ, that was part offset by platform biz. OPM up 420 bps QoQ.

MPS expect Rs. 1.3 billion of profit after tax for FY24 and aspire to grow revenue at compound annual growth rate of 25% for FY23-28E (60% from inorganic and 40% from organic).

Strong outlook for next five years and focus on acquiring growth business raises our confidence in biz driving up valuation multiple.

Maintain 'Accumulate' rating with target price of Rs 1630, valued at 18 times of FY26E earnings per share (implies ~two times price-to-earnings growth).

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