ICICI Securities Recommends Buying Mphasis, Targets Price of Rs 2620

Mphasis Takes First Steps Towards AI-Driven Business Model

Mphasis, a leading global technology services company, has embarked on a significant transformation with the launch of its Enterprise Agency platform, Mphasis Tria. This platform marks the company's first steps towards a platform-led, outcome-based pricing model. The platform is expected to differentiate Mphasis from its peers by leveraging AI-driven productivity gains to drive larger strategic transformation deals. These deals are typically led by strong C-suite level client relationships.

The company will be closely monitoring several key metrics to track the success of Mphasis Tria, including platform ARR (currently in the low single digits), platform attach rate, and net retention rate. Notably, Mphasis has seen a significant rise in the share of fixed-price contracts, which has increased by 1,000 basis points year-over-year. Additionally, the company has achieved a substantial improvement in revenue and profitability per employee, with a 21% increase over the past two years. These developments signal a strategic pivot towards an AI-driven business model.

Outlook and Valuation

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Our research team continues to value Mphasis at 20x its FY28E EPS of INR 131, resulting in a target price of INR 2,620. We maintain a BUY recommendation for the company based on its promising growth prospects and strategic transformation initiatives.