Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MphasiS Ltd. — Subdued growth ahead; Retain Underperform
Company Update
We met up with MphasiS management recently. We believe revenue growth
remains challenging & margins likely to be under pressure. Key takeaways
Revenue growth likely to be challenging
Growth from HP channel (69% of revenues) likely to remain subdued (range of 1-
2% QoQ likely). As per management scope for offshore migration with existing
HP clients is limited and new client wins through joint go to market strategy is
slower than anticipated. Pricing pressure from HP remains, though clarified that
management stance is to maintain pricing from HP at current levels. During 1Q
MphasiS took pricing cut for a few accounts through HP channel.
Margins under pressure
Margins likely to remain under pressure. Expect EBIT margins to be in the range
of 16-18% down ~500bps yoy. 1Q EBIT stood at ~15%. May price aggressively
for new client wins. We have factored in EBIT margins of around 18% in our
estimates.
Likely to focus on inorganic growth
Keen on growing through acquisition to improve share of Non HP business in
banking, finance & insurance verticals. Cash & cash equivalents stood at
US$396mn end of 1Q.
Revenue visibility remains a concern
Growth likely to be challenging in our view. Number of open billable positions in
applications segment declined from 1,600 (4Q) to 1,000 during the quarter and in
Infra management (ITO) from 800 to 470 indicating lower revenue visibility on two
key segments. Retain Underperform rating with a PO of Rs490.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MphasiS Ltd. — Subdued growth ahead; Retain Underperform
Company Update
We met up with MphasiS management recently. We believe revenue growth
remains challenging & margins likely to be under pressure. Key takeaways
Revenue growth likely to be challenging
Growth from HP channel (69% of revenues) likely to remain subdued (range of 1-
2% QoQ likely). As per management scope for offshore migration with existing
HP clients is limited and new client wins through joint go to market strategy is
slower than anticipated. Pricing pressure from HP remains, though clarified that
management stance is to maintain pricing from HP at current levels. During 1Q
MphasiS took pricing cut for a few accounts through HP channel.
Margins under pressure
Margins likely to remain under pressure. Expect EBIT margins to be in the range
of 16-18% down ~500bps yoy. 1Q EBIT stood at ~15%. May price aggressively
for new client wins. We have factored in EBIT margins of around 18% in our
estimates.
Likely to focus on inorganic growth
Keen on growing through acquisition to improve share of Non HP business in
banking, finance & insurance verticals. Cash & cash equivalents stood at
US$396mn end of 1Q.
Revenue visibility remains a concern
Growth likely to be challenging in our view. Number of open billable positions in
applications segment declined from 1,600 (4Q) to 1,000 during the quarter and in
Infra management (ITO) from 800 to 470 indicating lower revenue visibility on two
key segments. Retain Underperform rating with a PO of Rs490.
No comments:
Post a Comment