MOSL: MPHASIS (Neutral)-Outperformance through Front2Back transformation-All strategic imperatives coming together
Mphasis: Outperformance through Front2Back transformation; All strategic imperatives coming together
(mphl IN, Mkt Cap USD2.8b, CMP INR988, TP INR960, 3% Downside, Neutral)
We attended MPHL’s analyst meet, where the company [1] demonstrated its Front2Back Digital transformation framework to stay ahead of the curve in new technologies, [2] elaborated various growth drivers that have been leading to an improved performance and [3] discussed the multitude of opportunities for a continued outperformance.
- Thanks to the traction in both HP and Direct channels, MPHL has seen a sharp turnaround in its performance in FY18. After a strong FY18, there remain several opportunities that are yet to be addressed in both these areas, which would ensure a sustained long-term outperformance.
- While it is investing in these new areas to capitalize on the new opportunities, there are several tailwinds available in the form of pyramid rationalization, higher fixed price contracts and improved pricing in new technologies.
- These factors are reflected in the outlook for next year of at/above-industry growth in HP, above-industry growth in Direct, and 15-17% operating margin (100bp higher compared to the previous target band).
- MPHL ended the year with 9.8% YoY CC revenue growth, 50bp margin expansion and 5.8% PAT growth after multiple years of subdued performance. Deal wins lend visibility of perpetuation of the current momentum. We maintain our Neutral rating with a target price of INR960.
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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