Buy Mphasis, target of Rs 240: Emkay Global

Emkay Global Financial Services has maintained its buy rating on Mphasis with a price target of Rs 240 in its March 2, 2009 “Mphasis reported superlative Q1FY09 results with revenues at Rs 9777 million (+9.3% QoQ, + 58.1% YoY) and operating profits (EBIT) at Rs 2106 million (+24.4% QoQ, +246.6% YoY). Operating margins remained steady at October month levels at 26.5%. Net profits at Rs 2100 million (+14.7% QoQ, +271.1% YoY) beat estimates boosted further by lower tax rates. Net employee addition remained in line at 1,193 (with apps HC up by 638 employees sequentially). Our confidence on Mphasis as the best demand story in the mid cap IT services space continues to get reinforced with enviable performance over the past 3 quarters now.

Our view gets vindicated with Mphasis being the 2nd best out performer in the IT services universe over the last 12 months (Mphasis has outperformed broader markets by 45%, next only to Infy on a LTM basis, refer section below). Although we increase our FY09 earnings estimates by 25% currently, we will review them shortly post discussions with co management as we believe there is significant upgrade to current estimates. Maintain BUY with a price target of Rs 240,” says Emkay Global Financial Services’ research report.

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