Mphasis (MPHL) reported Q3FY23 revenue decline of 3.1% cc QoQ (+3.8% cc YoY) — below IIFLe of -0.4%. Revenue decline was led by higher-than-expected ramp down in the Mortgage business (8.8% of Q3 revenues) and seasonal furloughs. Ebit margins stood at 15.3% (flat QoQ), with MPHL maintaining FY23 Ebit margin guidance of 15.25-17%. Direct channel declined 2.8% cc QoQ (+19.2% cc YoY), due to weakness in Mortgage business and seasonal furloughs. Mortgage business (8.8% of overall revenues) revenues have declined by 24% QoQ/38% YoY, led by ~80% reduction in volumes.
Analysts at IIFL Securities forecast MPHL to deliver 10% USD revenue growth over FY23ii-25ii, lagging mid-cap peers.
Outlook for its Mortgage business continue to remain uncertain in near term, given the high interest rate in US. However, over the medium term, the company is confident of maintaining growth momentum and gaining share with key clients. Analysts at IIFL Securities lower the revenue growth assumptions leading to 1– 3% cut in FY23-25 EPS.
IIFL Securities maintain Add on Mphasis with target price of Rs 2,000, based on 18x 2YF EPS.
