Mphasis Ltd Top client woes continue to drag revenue performance ::Emkay

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Mphasis Ltd

Top client woes continue to drag revenue performance

REDUCE

CMP: Rs325                                        Target Price: Rs325

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n     Op performance missed exp with below par rev growth (-4% QoQ in US$ terms) while mgns declined by ~150 bps QoQ to 17.9% aided by weak currency, improvement in utilization

n     Profits at Rs 1.8 bn (-5.5% QoQ, -35.4% YoY) missed est. driven by lower op performance and lower than expected forex gains ( Rs 199 mn V/s est of ~Rs 459 mn)

n     Raise our Oct’12E earnings by ~9% to Rs 35.4 aided by lower currency resets( to Rs 48/$ V/s Rs 45/$ earlier) despite further cut to modest rev growth expectations

n     Retain REDUCE with an unchanged TP of Rs 325. Cash at ~27% of mkt cap will limit sharp downsides post ~ 50% fall in price in last 1 yr, however see no end to co’s woes