Mphasis Ltd -Another quarter aided by one offs REDUCE ::Emkay

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Mphasis Ltd

Another quarter aided by one offs

REDUCE

CMP: Rs396                                        Target Price: Rs325

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n     Mphasis’s string of poor show continues. While reported pfts at Rs 1.9 bn (-11% QoQ, -29% YoY) was higher than est., adjusted pfts at Rs 1.5 bn were mgnlly lower than expected

n     Adjusted revenues were flat both sequentially and on a YoY basis with direct business growing at a modest 3% QoQ (lower than peers) and HP business continues to suffer

n     We cut our Oct’12E earnings by ~10% to Rs 32.6 despite incorporating in Wyde acquisition as we cut organic revenues/margins expectations sharply( refer section below)

n     Retain REDUCE with a revised TP of Rs 325(V/s Rs 400 earlier) based on ~10x Oct’12E EPS. A potential open offer from parent HP remains an upside risk to our call