Mphasis closed the week with strong 7% gains after the 3% surge in Friday’s trade. In fact, the IT stocks bucked the overall market trend on Friday and clocked smart gains and MphasiS was amongst the star performers. The share price rallied as investors gave a thumbs up to the in-line set of results with strong deals-wins. Brokerage house, Nuvama has maintained its Buy rating on the stock
According to Nuvama, despite the Buy, they have trimmed estimates slightly as “the logistics segment remains an area of concern, though management clarified that the impact was not due to one client. We are trimming estimates (< 3%) on slightly lower growth due to headwinds in logistics.”
The brokerage house updated the FY26/27 estimates for dollar-rupee at 86.5 and “a rollover to 30x FY27E PE yields a target price of Rs 3,650 (Vs earlier target price of Rs 3,800).”
Why Nuvama maintains a Buy on MphasiS?
Nuvama, despite revising the target price lower has maintained the Buy rating because –
MphasiS to benefit from tailwinds in BFSI
Nuvama sees MphasiS to be a potential beneficiary of the higher exposure to BFSI and as a result have maintained the Buy rating on the stock. According to their report, “MphasiSs is benefitting from tailwinds in the BFSI segment (60% of revenue) with only the travel vertical holding it back—which too, should bottom out in coming quarters, in our view.”
MphasiS’ AI investments likely to bear fruit
According to Nuvama another key factor that is a positive for the company is that “TCV has been solid while margins have been stable—both expected to maintain their trajectories.” They believe better deal conversion should help MphasiS “deliver stronger growth, with AI investments likely to bear fruit in medium to long-term.”
MphasiS maintained margin guidance
MphasiS maintained its evenue and margin guidance and the pipeline is strong. This guidance according to Nuvama is higher than average growth target for the industry, “Management maintained the FY25 guidance of ‘higher than industry average’ growth and margin band of 14.6–16%. TCV was strong at $351 million (+70% QoQ/+46% YoY) with wins across verticals.”
MphasiS deal pipeline solid
Mphasis closed a $100 million deal in January and this is expected to reflect in Q4. Nuvama outlined that the MphasiS “management highlighted significant pipeline visibility (+23% QoQ)—BFS (+58% YoY); non-BFS (+42% YoY). They expect Q4 to be the best since Q4FY22, and are seeing improvement in demand environment as macro continues to turn positive, especially in BFS with some uptick in discretionary spends.”
MphasiS management outlook positive
The MphasiS management also sounded very upbeat in terms of the guidance going forward. Addressin analysts, they said the “Q4 is expected to be one of the best quarters for MphasiS in the last three years, and margins in FY26 to be in a band of 14.6 – 16%.” They are hopeful that the macro situation continues to turn positive, especially in BFSI and see scope for some increase in discretionary spends.
