BNP Paribas Securities has a mixed view on MphasiS, a company in the IT Software sector, with a target price of Rs 2,900. Currently, MphasiS shares are priced at Rs 2,927.05. The company, started in 1992, is a mid-sized firm worth Rs 54,917.92 crore.
For the quarter ending September 30, 2024, MphasiS made Rs 3,594.90 crore in total income. This is an increase of 2.83% from the previous quarter and 8.10% more than the same time last year, when total income was Rs 3,325.54 crore. The company’s net profit after tax for this latest quarter was Rs 423.33 crore.
The management team includes notable members like Nitin Rakesh and others. B S R & Co. LLP audits the company. As of September 30, 2024, there are 19 crore shares of MphasiS available.
Reason for Caution:
MphasiS has been significantly affected by rising interest rates due to its involvement in the mortgage business. While the management has managed to limit the negative impact on revenue growth, MphasiS hasn’t performed as well as its mid-sized competitors in this area. Recovery in tech spending by U.S. banking and financial services customers is crucial for the company’s growth.
BNP Paribas is cautious because the mortgage business isn’t showing signs of recovery in the near future. They believe MphasiS may be overvalued compared to the CNX IT Index without strong growth from the U.S. mortgage sector.
Valuation Insights:
BNP Paribas uses a Discounted Cash Flow (DCF) method to value MphasiS. They expect a 10% revenue growth by 2024, a Weighted Average Cost of Capital (WACC) of 11%, and a terminal growth rate of 5%.
Ownership Details:
As of September 30, 2024, the promoters own 40.32% of MphasiS, foreign institutional investors (FIIs) hold 18.25%, and domestic institutional investors (DIIs) possess 36.54%.
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