Blog

Mphasis Share Movement of the Day

Highlights

Why is Mphasis stock in the news?

Mphasis Limited has caught investors’ attention recently due to its remarkable performance. The company’s stock price has gained 12.47% in the past month, outperforming the BSE Information Technology index’s 9.37% gain and the Sensex’s 4.52% rise. Mphasis gained 5.39% in a single day, indicating strong investor sentiment.

fundamental analysis

Stock Performance

The stock price of Mphasis hit a record high of ₹2835 on February 19, 2024 and is currently trading at ₹2697.85. In the last month, the stock has outperformed both the BSE Information Technology Index and the Sensex, indicating strong growth and resilience in the market. The stock has a price-to-earnings (P/E) ratio of 32.19, and a price-to-book (P/B) ratio of 5.13, reflecting investors’ optimism about its future growth prospects.
trading volume

Mphasis Ltd. traded 3,415 shares on BSE, while the average daily turnover in the past month was 24,685 shares, indicating increased interest from investors.

Shareholding Pattern

As of March 31, 2024, promoters hold 55.45% stake in the company, while foreign investors and domestic institutional investors hold 14.84% and 24.41%, respectively. This diversified shareholding pattern reflects a balanced mix of confidence from both domestic and international investors.

business analysis

Industry Status
Mphasis Limited operates in the IT Consulting and Software – Mid Cap industry. The company has a strong presence and reputation in providing IT solutions and services, which is reflected in its stock performance.

Revenue and profitability

Mphasis Limited reported consolidated sales of ₹3476.23 crore, although its performance declined by 5.2% over the previous quarter with revenues at $251.9 million. This decline was primarily due to a 10.9% drop in revenues from its top customer, Hewlett-Packard Company (HP), which still accounts for 55% of total revenues. Despite this, revenues from non-HP customers grew by 2.8% in dollar terms, a positive indicator of diversification.

executive efficiency

The company improved its operating profit margin by 50 basis points despite a decline in revenue. This improvement is due to the increasing share of revenue from non-HP customers, reflecting effective cost management and operational efficiency.

financial analysis

Price-to-Earnings (P/E) Ratio

Mphasis Limited has a P/E ratio of 32.19, which indicates that investors are willing to pay a higher price for its earnings due to expected future growth.

Price-to-Book (P/B) Ratio
The P/B ratio is 5.13, which indicates that investors see underlying value in the company, even if it has no growth prospects.

market performance
The company’s share price has gained 12.47% in the last month and 28.97% in the last year, outperforming the BSE Information Technology Index and Sensex.

Investment Considerations
Despite recent earnings disappointments and its dependence on HP for a significant portion of its revenues, Mphasis Limited’s ability to maintain and improve margins, combined with investor optimism, suggests a cautious but positive outlook for potential investors. The recent drop in the stock price ahead of the earnings announcement may have already factored in the weak results, which could explain the subsequent recovery.

Mphasis Conference Call Highlights – May 2024

Macro Trends

1. Markets marked by volatility due to high interest rates, supply chain issues, labour market dislocations, record inflation and geopolitical uncertainties.
2. Worldwide IT spending is expected to grow by 6.8% in 2024, with IT services becoming the largest segment.
3. New opportunities in modernization of legacy systems, leveraging AI, and automation for operational efficiency.

AI adoption and partnerships

1. Focus on driving AI adoption with partnerships with hyperscalers and across the overall ecosystem.
2. Engage in AI-powered projects to improve reliability, claims processing efficiency, and security platforms.
3. Strategic collaborative agreement with AWS for General AI in Financial Services.

Trade Show

1. DXC achieved revenue stability, now representing 3% of revenue.
2. The share of emerging sectors such as insurance, TMT, logistics and transportation increased to 52% of revenue.
3. Strong revenue growth in Canada of 42% year-over-year.
4. Investing in nearshore model with 27% increase in number of employees across various regions.

Financial Metrics

1. EBIT margin stood at 14.9% impacted by Silverline acquisition costs.
2. Reported operating profit declined by 1.4% year-on-year.
3. Cash flow generation for the quarter stood at US$55 million, representing 116% of net income.
4. DSO improved to 66 days, 3 days higher than the previous quarter.

Outlook for FY 2025

1. Focus on integrating capabilities and seizing growth opportunities.
2. The industry is expected to post strong growth, with clear benefits from technology-based strategies.
3. Operating margin is expected to be in the range of 14.6% to 16%, with a focus on operational stringency.
4. Strong customer mining model and technology based offerings to drive revenue growth.

Challenges and opportunities

1. Uncertainty in spending and sentiment due to macro factors.
2. Relentless focus on driving in-account actions and wallet share gains from the bottom up.
3. Short-burst deals are showing signs of activity, which could boost revenue growth in the near future.

Technology adoption in BFSI

1. Technology adoption will lead to redesign of operations and technology in BFSI.
2. Automation and AI-based operations are transforming service lines, creating new opportunities.
3. Short-burst deals indicate the potential for sustained revenue growth in the BFSI segment.

Interest Rate Scenario

1. Acceptance of higher interest rates for longer tenures in the BFSI sector.
2. NIM remained balanced with expansion despite higher deposit costs.
3. Focus on actions to boost growth amid interest rate uncertainties.

Execution and approach

1. I am very happy with the way he has worked in the last few months.
2. Focus was placed on continuing bottom-up, micro-level implementation.
3. Cautious optimism despite an uncertain environment.

conclusion

Mphasis Limited has shown resilience and growth potential despite some challenges. Its strong market performance, superior operating margins and diversified revenue streams make it an attractive option for investors. However, its dependence on HP and recent revenue decline highlight the need for cautious optimism. Investors should consider these factors while making an informed decision about investing in Mphasis Limited.