Mphasis - Inexpensive valuations, business challenges persist - Emkay

We met up with Mphasis CFO Mr. Ganesh Murthy recently. We present below the key takeaways:

- HP business to remain under pressure in the near term (4-5% QoQ decline in next 2-3 qtrs). Mgmt remains committed to protecting Mphasis's interests in the upcoming MSA renewal.

- Expect Direct business to grow higher than industry aided by strong client additions and leadership investments. Currently chasing 3 large deals (TCV US$ 20 mn+) within BCM space.

- Confident of sustaining EBIT mgns in the 15-18% range in the medium term. Intend to maintain utilization at elevated levels with some more room in fixed cost rationalization.

- Tweak FY Oct'12/Oct'13E EPS higher by 2/4% to Rs 37.6/37.5 respectively driven by lower currency resets. Roll over to FYOct'14 drives raise in TP to Rs 360 ( V/s Rs 340 earlier).

Source : Equity Bulls

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