Target: ₹2,323

CMP: ₹2,018.30

Mphasis Ltd Q1 FY23 consolidated revenues came in at ₹3,411 crore, up 26.77 per cent y-o-y and up 4.08 per cent q-o-q. Operating profit for Q1-FY23 stood at ₹600 crore, up 22.62 per cent y-o-y and up 3.96 per cent q-o-q. Operating margins for Q1-FY23 came at 17.59 per cent, -60bps y-o-y and -2 bps q-o-q. PAT for Q1-FY23 stood at ₹401.87 crore, up 18.31 per cent y-o-y and up 2.50 per cent q-o-q.

The management mentioned that company has healthy deal pipeline and continues to focus on hiring freshers for FY23. Management believes more cross selling opportunities from M&A will help the company to achieve industry leading growth in FY23 and expects tech spends to remain robust.

Management continues to remain confident of sustaining margins in a range of 15.25-17 per cent.

We believe company will continue to perform well over next few quarters due to strong deal win momentum. Also the confident commentary from management, declining revenue share of DXC and increase in average LTM size are other positive triggers for the stock.

We initiate a Buy rating on the stock and value the stock at 21.9x FY24 earnings to arrive at the target of ₹2323.