MOSL: MPHASIS (Neutral)-Operating performance ahead of estimates-But again on the back of Services / Technical Helpdesk
​Mphasis: Operating performance ahead of estimates; But again on the back of Services / Technical Helpdesk
(MPHL IN, Mkt Cap USD2.3b, CMP INR672, TP INR670, Neutral)
- Strong growth and deal wins: MPHL’s revenue growth of 4.9% QoQ to USD242m was better than our estimate of 2.4%, and more broad-based with HP channel up 6% and Direct International pitching in 5%. It reported deals TCV of USD123m on the back of USD183m in 1Q. While significantly lower QoQ, 1Q was exceptionally strong, and this is only the second USD100m+ TCV quarter since MPHL has started reporting this metric.
- But growth driven by ICT/Technical Helpdesk: Like in the last quarter, growth was again led by Technical Helpdesk service line and ICT/Entertainment vertical. Technical Helpdesk has now grown ~3.5x in two quarters to contribute 7% to revenue. It comprised 42/87% of 2Q/1H incremental revenue. The lopsided performance has also meant that BFSI (64% of revenue in 4QFY17) contributed only ~30% to incremental revenue whereas ICT (10.7% of revenue in 4QFY17) accounted for 70%.
- Beat on profitability, but risk on sustenance: EBIT margin expanded 60bp QoQ (declined 90bp YoY) to 14.4% v/s our estimate of 14%. Adjusted for forex gains (which MPHL includes while reporting its EBIT margin), EBIT margin deteriorated 210bp YoY versus 90bp decline in reported margin. PAT grew 5.6% QoQ to INR1.98b. Though it maintained its 14-16% target band, 460bp increase in onsite revenue over the last two quarters, lower expected utilization and higher investments, demand caution on the sustenance of margins, in our view.
Mphasis Limited is a information technology solution provider in cloud and cognitive services. The Company's segments include Banking and Capital Market, Insurance, Information Technology, Communication and Entertainment and Emerging Industries. The geographical segments include United States of America, India, Asia Pacific and Europe, Middle East and Africa. It offers cloud computing, cognitive solutions, digital services, securing businesses, application services and infrastructure services. The Company serves various industries such as banking and capital market which includes, retail banking, credit cards and payments, wealth management and brokerage, corporate banking solutions and investment banking technology. Its insurance industry includes, property and casualty, life and retirement and health. Its other industries consist of communications, energy and utilities, healthcare, life science, logistics, manufacturing and travel and transportation.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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