Buy Mphasis: target of Rs 3020: ICICI Securities

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Mphasis has raised its FY27 guidance to low double-digit CC growth, driven by a record pipeline, TCV backlog, and improved conversion of TCV to revenue.
  • The company's revenue growth is expected to be led by BFSI, TMT, and Insurance, with a focus on AI-led deals and Tria-led process modernisation.
  • Mphasis is prioritising growth over margins, with a focus on investing in IP, coverage, sales, and platforms, and expects to maintain its EBIT margin at 14.75-15.75% for FY27.
  • The company's cash conversion is expected to improve, with a target of 80% OCF/net income for FY27, driven by better revenue growth visibility and healthy traction in AI-led wins.

Thesis Validation Checklist

  • Investors should watch for signs of improving revenue growth, driven by the company's record pipeline and TCV backlog, as well as the success of its AI-led deals and Tria-led process modernisation.
  • The company's ability to maintain its EBIT margin and improve its cash conversion will be key to validating the thesis.
  • Investors should also monitor the company's progress in investing in IP, coverage, sales, and platforms, and its ability to drive growth through these initiatives.