Mphasis LTD: Index Details

CMP: 1074.
70 Oct 22nd, 2018

MPHASIS LTD ISIN:
Result Update (CONSOLIDATED BASIS): Q2 FY19 Overweight
NE356A01018
Index Details
SYNOPSIS
Stock Data
Mphasis Ltd is engaged in providing a suite of
Sector IT Consulting & Software
application development and maintenance services,
BSE Code 526299
Face Value 10.00 infrastructure outsourcing services and business
52wk. High / Low (Rs.) 1278.00/643.45 process outsourcing solutions to clients around the
Volume (2wk. Avg.) 63000 world.
Market Cap (Rs. in mn.) 207759.93
The company achieved a turnover of Rs. 19148.41
Annual Estimated Results(A*: Actual / E*: Estimated) million for the 2nd quarter of the financial year 2018-
Years (Rs. in mn) FY18A FY19E FY20E 19 as against Rs.16046.87 million in the
Net Sales 65458.36 76586.28 88074.22 corresponding quarter of the previous year, up by
EBITDA 12244.69 14932.92 17056.64 19.33%.
Net Profit 8374.99 10614.08 12171.11
During the quarter, Net profit jumped to Rs. 2709.25
EPS 43.33 54.90 62.96
million from Rs. 1976.90 million in the
P/E 24.80 19.57 17.07
corresponding quarter ending of previous year, an
Shareholding Pattern (%) increase of 37.05%.
As on Sep 2018 As on Jun 2018 During the quarter, EBIDTA is Rs. 3804.94 million
Promoter 52.34 52.37 as against Rs. 2868.11 million in the corresponding
period of the previous year, up by 32.66%.
Public 47.66 47.63
Others -- -- Profit before tax (PBT) increased by 35.32% to Rs.
3586.17 million in Q2 FY19 from Rs. 2650.23
1 Year Comparative Graph million in the corresponding quarter of the previous
year.
EPS of the company stood at Rs. 14.01 a share

during the quarter, as against Rs. 10.23 over
previous year period.
Net Sales and PAT of the company are expected to

grow at a CAGR of 10% and 18% over 2017 to
2020E, respectively.
MPHASIS LTD S&P BSE SENSEX
PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Mphasis Ltd 1074.70 207759.93 50.79 21.16 3.79 200.00
Cigniti Technologies Ltd 377.00 10355.30 28.04 13.45 145.56 0.00
Persistent Systems Ltd 564.95 45196.00 41.92 13.48 2.12 100.00
Sonata Software Ltd 307.25 32310.20 19.73 15.57 4.95 1050.00
Document code: FOTL_221020183_2 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS)
Results updates- Q2 FY19,
(Rs. In million) Sep-18 Sep-17 % Change
Revenue 19148.41 16046.87 19.33%
Net Profit 2709.25 1976.90 37.05%
EPS 14.01 10.23 36.94%
EBIDTA 3804.94 2868.11 32.66%
Mphasis Ltd has achieved a turnover of Rs. 19148.41 million for the June quarter of the financial year 2018-19 as against
Rs. 16046.87 million in the corresponding quarter of the previous year, up by 19.33%. Net profit jumps to Rs. 2709.25
million from Rs. 1976.90 million in the corresponding quarter ending of previous year, an increase of 37.05%. Reported
earnings per share of the company stood at Rs. 14.01 a share during the quarter, as against Rs. 10.23 over previous year
period. Profit before interest, depreciation and tax is Rs. 3804.94 million as against Rs. 2868.11 million in the
corresponding period of the previous year.
Break up of Expenditure
%
Break up of Q2 FY19 Q2 FY18
Expenditure CHNG
Employee Benefit
10603.86 9285.13 14%
Expenses
Depreciation &
Amortization 183.68 180.45 2%
Expense
Other Expenses 5215.50 4269.27 22%
Segment Revenue
Highlights of performance for the Quarter ended 30th September, 2018
 Gross Revenue grew 6.9% QoQ and 24.5% YoY on a reported basis on constant currency basis, growth was 3.0%
QoQ and 14.8% YoY.
 Direct Core revenue grew 8.0% QoQ and 24.6% YoY on a reported basis on constant currency basis, growth was
3.9% QoQ and 14.3% YoY.
 DXC/HP revenue grew 10.5% QoQ and 34.7% YoY on a reported basis on constant currency basis, growth was 6.4%
QoQ and 24.7% YoY.
 New deal wins of USD 210 million TCV in Direct International business; of which 77% are in New-Gen Services.
 Net profit grew 4.9% QoQ and 37.0% YoY to Rs. 2,709 million.
 EPS grew 4.9% QoQ and 36.9% YoY to Rs. 14.0.
COMPANY PROFILE
Mphasis applies next-generation technology to help enterprises transform businesses globally. Customer centricity is
foundational to Mphasis and is reflected in the Mphasis’ Front2Back™ Transformation approach. Front2Back™ uses the
exponential power of cloud and cognitive to provide hyper-personalized (C=X2C2 TM=1) digital experience to clients and
their end customers. Mphasis’ Service Transformation approach helps ‘shrink the core’ through the application of digital
technologies across legacy environments within an enterprise, enabling businesses to stay ahead in a changing world.
Mphasis’ core reference architectures and tools, speed and innovation with domain expertise and specialization are key to
building strong relationships with marquee clients.
FINANCIAL HIGHLIGHT (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as of March 31, 2017 -2020E
FY17A FY18A FY19E FY20E
ASSETS
1) Non-Current Assets
a) Property, plant and equipment 1040.84 874.66 927.14 1005.95
b) Capital Work in Progress 7.24 19.15 0.00 0.00
c) Goodwill 16977.88 17014.72 17525.16 17928.24
d) Other intangible assets 1192.65 950.88 1017.44 1129.36
e) Intangible Assets Under Development 3.53 3.40 3.74 3.93
f) Financial assets
i) Investments 1255.17 3169.22 3739.68 4001.46
ii) Trade receivables 31.32 10.60 5.72 28.85
iii) Loans and advances 1110.59 1139.84 1174.04 1221.00
iv) Other financial assets 110.79 77.02 66.24 73.52
g) Deferred tax assets(net) 618.17 1056.82 1310.46 1520.13
h) Income tax assets 4352.88 4570.34 4753.15 4990.81
i) Other non -current assets 1977.80 1506.51 1702.36 1838.54
Sub Total Non- Current Assets 28678.86 30393.16 32225.13 33741.79
2) Current Assets
a) Inventories 0.00 0.00 0.00 0.00
b) Financial assets
i) Investments 22701.28 14651.46 16466.58 17948.57
ii) Trade receivables 6278.71 8116.34 9414.95 10069.66
iii) Cash and bank equivalents 6132.66 4641.76 4966.68 5550.14
iv) Other bank balances 11.46 2425.47 2692.27 3365.34
v) Loans & advances 707.00 824.09 931.22 1024.34
vi) Other financial assets 5978.11 6000.67 6240.70 6427.92
c) Other current assets 2682.81 2800.42 2892.83 3008.55
Sub - Total Current Assets 44492.03 39460.21 43605.24 47394.52
Total Assets (1+2) 73170.89 69853.37 75830.37 81136.30
EQUITY AND LIABILITIES
1) EQUITY
a) Equity Share Capital 2104.24 1932.67 1933.19 1933.19
b) Other equity 59419.82 52885.15 57116.75 61685.24
Total Equity 61524.06 54817.82 59049.94 63618.43
2) Non Current Liabilities
a) Financial liabilities
i) Borrowings 0.00 0.00 0.00 0.00
ii) Other financial liabilities 11.03 38.15 57.61 64.52
iii) Net employee defined benefit liabilities 543.53 523.37 502.44 517.51
b) Long-term Provisions 0.00 50.00 60.50 55.66
c) Deferred tax liabilities (Net) 158.30 49.71 39.27 47.91
d) Other non-current liabilities 48.02 43.62 39.26 40.83
e) Income tax liabilities (net) 0.00 311.00 368.54 423.82
Sub Total - Non Current liabilities 760.88 1015.85 1067.61 1150.24
3) Current Liabilities
a) Financial liabilities
i) Borrowings 2601.60 3898.80 4366.66 3625.20
ii) Trade payables 3878.22 5023.92 5727.27 6357.27
iii) Other financial liabilities 1600.76 1802.87 1947.10 2180.75
b) Net employee defined benefit liabilities 783.98 730.63 701.40 729.46
c) Short-term provisions 373.20 245.80 282.67 313.76
d) Other current liabilities 997.39 1445.73 1677.05 2029.23
e) Income tax liabilities (Net) 650.80 871.95 1010.68 1131.96
Sub Total - current liabilities 10885.95 14019.70 15712.82 16367.63
Total Equity and Liabilities (1+2+3) 73170.89 69853.37 75830.37 81136.30
Annual Profit & Loss Statement for the period of 2017 to 2020E
Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Description 12m 12m 12m 12m
Net Sales 60763.57 65458.36 76586.28 88074.22
Other Income 2386.06 1620.96 1783.06 1907.87
Total Income 63149.63 67079.32 78369.34 89982.09
Expenditure -51075.61 -54834.63 -63436.42 -72925.46
Operating Profit 12074.02 12244.69 14932.92 17056.64
Interest -138.75 -129.96 -155.95 -177.79
Gross profit 11935.27 12114.73 14776.97 16878.85
Depreciation -791.49 -708.21 -746.45 -768.85
Exceptional Items -151.68 -130.78 0.00 0.00
Profit Before Tax 10992.10 11275.74 14030.52 16110.00
Tax -3076.34 -2900.75 -3416.43 -3938.90
Net Profit 7915.76 8374.99 10614.08 12171.11
Equity capital 2104.24 1932.67 1933.19 1933.19
Reserves 59419.82 52885.15 63499.23 75670.34
Face value 10.00 10.00 10.00 10.00
EPS 37.62 43.33 54.90 62.96
Quarterly Profit & Loss Statement for the period of 30th Mar, 2018 to 31st Dec, 2018E
Value(Rs.in.mn) 30-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18E

Description 3m 3m 3m 3m
Net sales 17444.88 18202.23 19148.41 19722.86
Other income 422.64 452.74 475.89 494.93
Total Income 17867.52 18654.97 19624.30 20217.79
Expenditure -14350.18 -15002.02 -15819.36 -16204.30
Operating profit 3517.34 3652.95 3804.94 4013.48
Interest -43.15 -44.89 -35.09 -42.11
Gross profit 3474.19 3608.06 3769.85 3971.38
Depreciation -171.07 -179.04 -183.68 -187.35
Exceptional Items -130.78 0.00 0.00 0.00
Profit Before Tax 3172.34 3429.02 3586.17 3784.02
Tax -795.62 -845.92 -876.92 -915.73
Net Profit 2376.72 2583.10 2709.25 2868.29
Equity capital 1932.67 1933.19 1933.19 1933.19
Face value 10.00 10.00 10.00 10.00
EPS 12.30 13.36 14.01 14.84
Ratio Analysis
Particulars FY17A FY18A FY19E FY20E
EPS (Rs.) 37.62 43.33 54.90 62.96

EBITDA Margin (%) 19.87% 18.71% 19.50% 19.37%
PBT Margin (%) 18.09% 17.23% 18.32% 18.29%
PAT Margin (%) 13.03% 12.79% 13.86% 13.82%
P/E Ratio (x) 28.57 24.80 19.57 17.07
ROE (%) 12.87% 15.28% 16.22% 15.68%
ROCE (%) 17.59% 19.65% 20.32% 20.05%
Debt Equity Ratio 0.04 0.07 0.07 0.05
EV/EBITDA (x) 16.56 15.51 12.59 10.82
Book Value (Rs.) 292.38 283.64 338.47 401.43
P/BV 3.68 3.79 3.18 2.68
Charts
OUTLOOK AND CONCLUSION
 At the current market price of Rs. 1074.70, the stock P/E ratio is at 19.57 x FY19E and 17.07 x FY20E respectively.
 Earning per share (EPS) of the company for the earnings for FY19E and FY20E is seen at Rs. 54.90 and Rs. 62.96
respectively.
 Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 18% over 2017 to 2020E,
respectively.
 On the basis of EV/EBITDA, the stock trades at 12.59 x for FY19E and 10.82 x for FY20E.
 Price to Book Value of the stock is expected to be at 3.18 x and 2.68 x for FY19E and FY20E respectively.
 Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.
INDUSTRY OVERVIEW
The global sourcing market in India continues to grow at a higher pace compared to the IT-BPM industry. India is the
leading sourcing destination across the world, accounting for approximately 55 per cent market share of the US$ 185-190
billion global services sourcing business in 2017-18. Indian IT & ITeS companies have set up over 1,000 global delivery
centres in about 80 countries across the world.
More importantly, the industry has led the economic transformation of the country and altered the perception of India in
the global economy. India's cost competitiveness in providing IT services, cost savings of 60–70 per cent over source
countries, continues to be the mainstay of its Unique Selling Proposition (USP) in the global sourcing market. However,
India is also gaining prominence in terms of intellectual capital with several global IT firms setting up their innovation
centres in India.
India has become the digital capabilities hub of the world with around 75 per cent of global digital talent present in the
country.
India’s IT & ITeS industry grew to US$ 167 billion in 2017-18. Exports from the industry increased to US$ 126 billion in
FY18 while domestic revenues (including hardware) advanced to US$ 41 billion.
Spending on Information Technology in India is expected to grow over 9 per cent to reach US$ 87.1 billion in 2018.
India’s Personal Computer (PC) shipment advanced 11.4 per cent year-on-year to 9.56 million units in 2017 on the back
of rise in the quantum of large projects.
Revenue from digital segment is expected to comprise 38 per cent of the forecasted US$ 350 billion industry revenue by
2025
Government Initiatives
Some of the major initiatives taken by the government to promote IT and ITeS sector in India are as follows:
 The government has identified Information Technology as one of 12 champion service sectors for which an action
plan is being developed. Also, the government has set up a Rs 5,000 crore (US$ 745.82 million) fund for realising
the potential of these champion service sectors.
 As a part of Union Budget 2018-19, NITI Aayog is going to set up a national level programme that will enable
efforts in AI and will help in leveraging AI technology for development works in the country.
Road Ahead
India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering
both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of
opportunities for top IT firms in India. Export revenue of the industry is expected to grow 7-9 per cent year-on-year to
US$ 135-137 billion in FY19. The industry is expected to grow to US$ 350 billion by 2025 and BPM is expected to
account for US$ 50-55 billion out of the total revenue.
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Name of the Analyst Qualifications
Covered Coverage in the Current
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M.B.A, Diversified
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Goods
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CMP: 1074.

70 Oct 22nd, 2018

EPS of the company stood at Rs. 14.01 a share

Net Sales and PAT of the company are expected to

Results updates- Q2 FY19,

(Rs. In million) Sep-18 Sep-17 % Change

Revenue 19148.41 16046.87 19.33%

Net Profit 2709.25 1976.90 37.05%

EPS 14.01 10.23 36.94%

EBIDTA 3804.94 2868.11 32.66%

Other Expenses 5215.50 4269.27 22%

Highlights of performance for the Quarter ended 30th September, 2018

 EPS grew 4.9% QoQ and 36.9% YoY to Rs. 14.0.

Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Value(Rs.in.mn) 30-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18E

EPS (Rs.) 37.62 43.33 54.90 62.96

Important Disclosures on Subject Companies

Firstcall Research - Overall Statement

Firstcall Research Provides

For Further Details Contact:

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