Mphasis Q2 Review - One-Off Cost Impacts Margin: ICICI Direct
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ICICI Direct Report
Mphasis Ltd. reported muted Q2FY22 profitability.
Dollar revenue increased 6.1% QoQ to $385.2 million.
Adjusted (to one-off costs) margin fell 10 basis points QoQ.
Expects industry leading growth in direct and EBIT margin (15.5-17%).
Key triggers for Mphasis' future price performance:
Strategy to mine top 10/20 clients, adding high potential new logos, increase in deal sizes, and expansion in Europe bodes well for long term growth.
Further, management stability, improving deal size, market share gains via vendor consolidation, low legacy exposure and exposure to lesser impacted vertical to drive 25% compound annual growth rate growth in direct revenues in FY21-23E.
Improving revenue trajectory, higher offshoring, pricing, and automation to boost margins (90 bps to 17.0% in FY21-23E).
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