Motilal Oswal Upgrades Mphasis to 'Buy', Targets Rs 3100
Mphasis Reports Strong Q4 Earnings, Beats Estimates on EBIT Margin
Mphasis, a leading digital transformation and IT consulting company, has reported its quarterly earnings for the fourth quarter of fiscal year 2026 (4QFY26). The company's revenue in constant currency (CC) rose 2.5% quarter-over-quarter (QoQ), in line with Motilal Oswal's estimate of 2.5% QoQ CC.
The company's direct revenue growth was even more impressive, rising 3.3% QoQ CC and 9.2% year-over-year (YoY) CC. This is a significant increase in direct revenue, which is a key indicator of a company's ability to generate revenue from its core business. The total contract value (TCV) of new deals signed by the company rose 4.4% YoY to USD407 million.
In terms of profitability, Mphasis reported an earnings before interest and taxes (EBIT) margin of 15.4%, which is above Motilal Oswal's estimate of 15.2%. The adjusted profit after tax (Adj. PAT) came in at INR5.1 billion, up 8.7% QoQ, although slightly below the estimate of INR5.1 billion.
Forecast and Valuation
Motilal Oswal has a bullish outlook for Mphasis, forecasting a compound annual growth rate (CAGR) of approximately 10% in USD revenue and 15% in INR PAT over the next two fiscal years. Based on this forecast, the research firm values the stock at 24 times fiscal year 2028 earnings per share (FY28E EPS), arriving at a target price of INR3,100.
Recommendation
Given the company's strong earnings performance and positive outlook, Motilal Oswal reiterates its BUY rating on Mphasis stock.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
| Metric | Actual | Estimate |
|---|---|---|
| Revenue Growth (QoQ, CC) | 2.5% | 2.5% |
| Direct Revenue Growth (QoQ, CC) | 3.3% | - |
| Direct Revenue Growth (YoY, CC) | 9.2% | - |
| TCV (USD million) | 407 | - |
| EBIT Margin | 15.4% | 15.2% |
| Adj. PAT (INR billion) | 5.1 | 5.1 |
| Earnings Forecast (FY28E EPS) | - | 24x |
| Target Price (INR) | - | 3,100 |
Investor Takeaway
Investors should consider buying Mphasis stock due to its strong revenue growth and positive outlook.
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