ICICI Securities Recommends Investment in Mphasis, Sets Target Price at Rs 2620

Mphasis Provides Guidance for FY27, Exceeding Consensus Expectations

Mphasis, a leading global technology services provider, has issued its first-ever formal revenue guidance for the fiscal year 2027 (FY27), projecting high-single to low-double-digit growth. This guidance aligns with consensus expectations, providing investors with better comfort and visibility amidst the challenges posed by macroeconomic uncertainty and the impact of AI-led deflation.

The company's guidance is backed by a record deal value in FY26, which rose by 68% year-over-year (YoY). Additionally, Mphasis has reported a healthy deal pipeline, up 38% YoY, and strong growth momentum in the banking, financial services, and insurance (BFSI) sector. These factors contribute to a positive outlook for the company's future performance.

Mphasis has also demonstrated impressive operating margin expansion in FY26, with a 80 basis points (bps) increase YoY, excluding hedge losses. However, the company expects margins to remain range-bound in FY27. The rise in the share of fixed-price contracts, up 1,000bps YoY, and revenue per employee, up 21% over two years, signal a strategic pivot toward an AI-driven business model.

Read also: SpaceX Seeks Record $75 Billion IPO, Potentially Positioning Elon Musk as the World's First Trillionaire

Key highlights of Mphasis' performance include:

The company's operating cash flow to net income (OCF/NI) target of 80% for FY27 addresses concerns regarding cash flow conversion. Based on this guidance, ICICI Securities maintains its BUY recommendation for Mphasis, valuing the company at 20x the estimated earnings per share (EPS) of INR 131 for FY28, with a target price of INR 2,620.