Mphasis Q2 Review - Direct Core Continues To Shine: Prabhudas Lilladher

Prabhudas Lilladher Report

Mphasis Ltd.'s strong revenue growth of 6.1% QoQ in dollar terms was driven by exceptional performance in Direct core business (+9.5% QoQ $) partially offset by sharp decline in DXC (-25.7% QoQ $).

Revenue share of DXC has now declined to 6.5% (vs 16% in Q2 FY21). Direct core business now contributes to 92% of total revenue and going forward, overall growth will be increasingly reflected by Direct core business.

We expect Direct core to deliver industry leading growth in FY22 (~32% YoY).

MPHL had healthy new TCV wins of $241 million in Q2 FY22 in Direct business, of which 68% are in new generation services. YTD TCV is at $747 million, grown at 50% CAGR over last two years.

Management mentioned that demand momentum continues to be strong and sustainable which is also reflected by growth in new gen large deal pipeline (+28% YoY and +13% QoQ).

We continue to like MPHL because of their

1) industry leading growth in Direct channel,

2) market share gains against larger peers,

3) consistent improvement in client mining and cross-selling,

4) deep presence within sub-segments across verticals and

5) stable operating margin performance compared to peers.

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