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Mphasis is witnessing modest growth from the non-HP channel business. The
company's ITO business is witnessing good growth, with open billable position
standing at 600 in 3QFY2011. In fact, this business segment has grown at a
scorching pace of 9.7% CQGR over 1QFY2010-3QFY2011 and is expected to
continue as a growth driver for the company.
The company is looking at an inorganic strategy to supplement its growth further.
Recently, management acquired Wyde, an international software vendor and creator
of Wynsure - an insurance policy administration IP solution - to scale up its insurance
portfolio. This acquisition is expected to be EBITDA accretive, as Wyde enjoys EBITDA
margin of 18%, higher than the company's EBITDA margin.
Going forward, management expects the direct channel (33% to revenue) and HP
non-enterprise solution business (which is currently ~5% of revenue from HP channel)
to drive growth, whereas the HP-ES business is expected to remain sluggish. We
expect the company to record a revenue CAGR of 10% over FY2011E-13E.
We value teh company at 11.5x FY2013E (October ending) EPS of `36.4, which
gives us a target price of `420 and recommend a Buy rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mphasis is witnessing modest growth from the non-HP channel business. The
company's ITO business is witnessing good growth, with open billable position
standing at 600 in 3QFY2011. In fact, this business segment has grown at a
scorching pace of 9.7% CQGR over 1QFY2010-3QFY2011 and is expected to
continue as a growth driver for the company.
The company is looking at an inorganic strategy to supplement its growth further.
Recently, management acquired Wyde, an international software vendor and creator
of Wynsure - an insurance policy administration IP solution - to scale up its insurance
portfolio. This acquisition is expected to be EBITDA accretive, as Wyde enjoys EBITDA
margin of 18%, higher than the company's EBITDA margin.
Going forward, management expects the direct channel (33% to revenue) and HP
non-enterprise solution business (which is currently ~5% of revenue from HP channel)
to drive growth, whereas the HP-ES business is expected to remain sluggish. We
expect the company to record a revenue CAGR of 10% over FY2011E-13E.
We value teh company at 11.5x FY2013E (October ending) EPS of `36.4, which
gives us a target price of `420 and recommend a Buy rating on the stock.
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