Emkay maintains 'buy' on Mphasis for target Rs 393
Emkay Share & Stock Brokers continues to maintain a ‘buy’ call on Mphasis BFL and has set a target price for Rs 393 for December 2008 based on 15 times one-year forward P/E multiple from the current market price of Rs 334.
By INDIATIMES NEWS NETWORK |
MUMBAI: Emkay Share & Stock Brokers continues to maintain a ‘buy’ call on Mphasis BFL and has set a target price for Rs 393 for December 2008 based on 15 times one-year forward P/E multiple from the current market price of Rs 334.
Emkay has introduced 2009-10 estimated earnings and believes that Mphasis would be closer to revenue size of $1 billion much earlier than the internal management target for 2009-10. The brokerage expects Mphasis to record revenue, EBITDA and earnings CAGR of 37 per cent, 41 per cent and 47per cent respectively over FY07-10 estimate. Besides, the brokerage believes that Mphasis stands out among the mid cap IT services peers both in terms of revenues visibility as well as margin resilience.
Emkay met Alok Misra, group CFO of Mphasis, to get update regarding the progress on the flow of work from EDS, ramp ups on the large contracts and capacity expansion plans under SEZs.
The Mphasis management sounded out that the visibility from the EDS channel continues to get better with 2008 expected to see further push from the EDS stable. Revenue from EDS has accounted 49 per cent of the overall revenue in first quarter of 2007-08. The EDS management has also indicated that the recent uptick in its applications signings has been precipitated by the Mphasis’s offshore strength. The management has also indicated of greater focus towards boosting its applications business by the way of treating this line of business as a separate business with an independent P&L, and increasing sales force along with greater co-ordination between the EDS and the Mphasis sales team.
Mphasis is making steady progress on the ramp-ups in the large deals, primarily the Vodafone deal where the company expects significant ramp-up starting from January-March of 2006-07 and expects to see 1,800 people working on the same by October-December of 2007-08. Besides, Mphasis would benefit from the applications portfolio greater that $1 billion deal bagged by EDS from KarstadQuelle, a German retail group.
Mphasis is building new delivery centres in Chennai for 2,500 seats, Pune for 3,000 seats and in Bangalore for 4,500 seats under SEZs which would translate into an effective tax rate of 16 per cent for 2009-10.
The brokerage is likely to highlight that Mphasis would have the highest proportion of revenues coming up from SEZs in 2009-10 estimate thereby reflecting into a lower effective tax against other peers which indicates the tax rates of 20 per cent.
Emkay has introduced 2009-10 estimated earnings and believes that Mphasis would be closer to revenue size of $1 billion much earlier than the internal management target for 2009-10. The brokerage expects Mphasis to record revenue, EBITDA and earnings CAGR of 37 per cent, 41 per cent and 47per cent respectively over FY07-10 estimate. Besides, the brokerage believes that Mphasis stands out among the mid cap IT services peers both in terms of revenues visibility as well as margin resilience.
Emkay met Alok Misra, group CFO of Mphasis, to get update regarding the progress on the flow of work from EDS, ramp ups on the large contracts and capacity expansion plans under SEZs.
The Mphasis management sounded out that the visibility from the EDS channel continues to get better with 2008 expected to see further push from the EDS stable. Revenue from EDS has accounted 49 per cent of the overall revenue in first quarter of 2007-08. The EDS management has also indicated that the recent uptick in its applications signings has been precipitated by the Mphasis’s offshore strength. The management has also indicated of greater focus towards boosting its applications business by the way of treating this line of business as a separate business with an independent P&L, and increasing sales force along with greater co-ordination between the EDS and the Mphasis sales team.
Mphasis is making steady progress on the ramp-ups in the large deals, primarily the Vodafone deal where the company expects significant ramp-up starting from January-March of 2006-07 and expects to see 1,800 people working on the same by October-December of 2007-08. Besides, Mphasis would benefit from the applications portfolio greater that $1 billion deal bagged by EDS from KarstadQuelle, a German retail group.
Mphasis is building new delivery centres in Chennai for 2,500 seats, Pune for 3,000 seats and in Bangalore for 4,500 seats under SEZs which would translate into an effective tax rate of 16 per cent for 2009-10.
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The brokerage is likely to highlight that Mphasis would have the highest proportion of revenues coming up from SEZs in 2009-10 estimate thereby reflecting into a lower effective tax against other peers which indicates the tax rates of 20 per cent.
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