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ICICI Direct Report
Mphasis Ltd.’s Q1 reported 4.6% QoQ fall in revenues in constant currency terms and margins declined 60 basis points to 15.7%. However, the company has seen robust deal wins in the quarter with 66% YoY growth in new deal total contract (TCV) to 259 million U.S. dollars. In addition, it has also signed 216 million U.S. dollar deal in July 2020 which will be reflected in Q2 FY21E. Further, the company has also seen healthy client addition of one client in 75 million U.S. dollar and three in 1 million U.S. dollar bucket. In addition, the company has guided margins of 15.5%-16.5% for FY21E.
The company is undertaking various measures for cost rationalisation like lower travel cost and lower discretionary spend. In addition, healthy revenue traction and improvement in utilisation will further drive company’s margins in coming quarters. Hence, we expect FY21E Ebit margins to increase 20 basis points YoY to 16.2% and see a further improvement in FY22E leading to an improvement of approximately 40 basis points YoY to 16.6%.
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