Mphasis Q2 Results Review - Operating Performance Inline; Muted Deal Booking: Centrum

Centrum Broking Report

Mphasis Ltd. reported inline performance for the quarter. Both, revenue and Ebit margin were as per estimates. It reported revenue of Rs 35.4 billion (up 3.3% QoQ in INR terms, up 2.7% QoQ in USD terms). Segment-wise, BFS grew by 3.6% QoQ, Insurance grew by 2.3% QoQ, technology, media and telecom grew by 6% QoQ; while logistics and transportation was down 1% QoQ.

Direct now contributes 95.8% ( flat in % contribution QoQ) of revenue ,while DXC contributes 2.7% of revenue. Ebit margin increased by 39 bps QoQ to 15.4%, led by control on direct costs. New total contract value win was at $207 million ( with 88% of deal wins in New Gen Services) versus $319 million in Q1 FY25.

Offshore revenue mix was down 20 bps QoQ to 42.7%. Total headcount was down 44 employees QoQ to 31,601 employees. Cash and equivalents of Rs 31.7 billion versus Rs 43.1 billion as of June-2024.

It is witnessing some pickup in TCV to revenue conversion with some increase in short duration deals. Deal pipeline remains strong, well distributed across verticals, with 35% being AI led deals. Management has guided for Ebit margin of 14.6% to 16% band for FY25.

It is witnessing higher traction in Generative AI solutions with significant number of AI solutions going mainstream. We expect revenue/Ebitda/profit after tax to grow at 11.5%/12.1%/14.0% over FY24-FY27E.

We have revised our FY25E/FY26E/FY27E EPS by (0.9%)/(1.3%)/NA.

We roll over to Sep’26 estimates for valuation and maintain Reduce rating on the stock with revised target price of Rs 3,103 (versus Rs 2,957 earlier) at PE of 27 times on Sep’26E EPS.

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