MOSL: MPHASIS (Neutral) - Strong traction coupled with robust deal wins
MPHASIS: Strong traction coupled with robust deal wins
(MPHL IN, Mkt Cap USD2.8b, CMP INR998, TP INR960, 4% Downside, Neutral)
- In-line quarter: MPHL's revenue grew 3.6% QoQ to USD261m, as against estimate of USD259m. EBIT margin expanded 130bp QoQ to 16.8% (v/s est. of 15.8%). However, this included a one-off bump from a Government of India contract, benefiting revenue by USD2m and margins by 50bp. Growth in 4Q was largely contributed by the HP channel (+8.3% QoQ CC). Direct Core grew 2.1% QoQ CC, but excluding Digital Risk, growth seems flattish. PAT grew 17% QoQ to INR2.5b (in-line).
- Deal wins lend strong visibility: The outlook of above-industry growth in both Direct Core and HP channel stems from (a) deal wins of USD551m in FY18 (+51% YoY) and (b) New Gen Services constituting 83% of deal wins and 42% of Direct Core revenue. Moreover, MPHL has seen the addition of three new vectors: (i) Blackstone portfolio, which clocked USD158m in deals in FY18, (ii) Europe and (iii) other entities in the HP channel.
- Margin guidance upped: MPHL guided for EBIT margins in the range of 15-17% (+100bp), despite investments in large deals, capabilities and new geographies. Headwinds from investments are getting more than offset by increased efficiency, higher fixed price component and rationalized pyramid.
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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