Our target is based on 10x FY15f EPS of R41.4. The 10x multiple we assign is in line with its five-year historical average and at these levels, we see limited upside potential for the stock. We prefer Tech Mahindra Ltdand Hexaware Technologies Ltd to MphasiS, within Tier-2 IT on better growth prospects.
We cut our dollar revenue growth estimates by 5% to 8% for FY14-15f on higher drag in HP and muted performance of the Direct channel. We lower our margin estimates by 140 bps for FY14f largely on account of a change in our USD-INR assumption to 62 versus 66 earlier. We estimate dollar revenue CAGR of 4% and EPS CAGR of 8% over FY13-15f.
We expect a 20% y-o-y decline in the HP channel (40% of revenue) in FY14f on the back of similar or higher declines over the past two years, which have continued in Q4FY13 as well.