Earnings Outlook
Mphasis consol PAT, revenue seen down on qtr, up on year
This story was originally published at 20:56 IST on 22 January 2025
Register to read our real-time news.Informist, Wednesday, Jan. 22, 2025
By Arya S. Biju
MUMBAI – Mphasis Ltd. is expected to report a sequential decline in both the top line and bottom line growth for the December quarter on account of furloughs, according to analysts. On a year-on-year basis, both these metrics are, however, expected to rise.
The information technology company is expected to report a 2% sequential fall in its consolidated net profit for the latest quarter to INR 4.15 billion, according to the average of estimates from 11 brokerages. Analysts expect the company's consolidated net sales to fall 0.5% sequentially to INR 35.17 billion for the quarter. On a year-on-year basis, the net profit is seen up 11% and net sales is seen up 5.4%.
Anand Rathi Share and Stock Brokers Ltd. has the highest estimate of INR 4.58 billion for the company's net profit, while Emkay Global Financial Services Ltd. had the highest estimate of INR 35.98 billion for net sales. JM Financial Institutional Securities Pvt. Ltd. had the lowest estimate for both bottom line and top line at INR 3.55 billion and INR 29.92 billion, respectively.
Analysts expect the company's top line to grow 0.2-0.8% sequentially in constant currency terms. The pickup in the banking, financial services, and insurance vertical, supported by healthcare platform Javelina, is expected to aid growth in the top line for the quarter, Nirmal Bang Equities Pvt. Ltd. said in its earnings review report.
The company's revenue in dollar terms for the December quarter is expected to be flat on quarter, Prabhudas Lilladher Pvt. Ltd. said. Some analysts also expect cross-currency headwinds of 30-50 basis points to impact revenue growth in the quarter.
Mphasis' deal wins for the December quarter are expected to be in the range of $200 million to $400 million, according to analysts. The company's total contract value across verticals and client pyramid as well as revenue conversion from total contract value are expected to continue improving in the December quarter, Motilal Oswal said. The company's total contract value for the September quarter was $207 million.
The operating margin, or earnings before interest and tax margin, of the company is seen contracting on quarter due to seasonality, furloughs, and amortisation of intangibles related to the acquisition of EDZ Systems. Continued investments in research and development for newer technologies and in the generative artificial intelligence segment will also impact margins in the quarter, Nirmal Bang said.
The company's EBIT margin is expected to be in the range of 14.80% to 15.40%, according to estimates from six brokerage firms. For the September quarter, the company reported an EBIT margin of 15.4%. Centrum expects the company to maintain its EBIT margin guidance of 14.6-16%.
The company will announce its Oct-Dec earnings on Thursday. Analysts expect investors to watch for management commentary on the company's deal pipeline and pace of deal conversions, client growth, and progress on growing non-top 10 clients. Investors will also look for commentary on the mortgage business and financial services post interest rate cut in the US, margin trajectory and progress, demand environment, and pricing. Management commentary on the possibility of recovery of discretionary spending is also a key monitorable.
On Wednesday, shares of the company closed at INR 2,808.95 on the National Stock Exchange, up 1.3%. The stock has fallen over 9% since the announcement of the September quarter earnings post-market hours on Oct. 17. Of the 14 brokerage reports available on the company with Informist, seven have a 'buy' or equivalent rating on the stock, four have a 'hold' or equivalent rating, and three have a 'sell' or equivalent rating on the stock.
Following are the Oct-Dec earnings estimates for Mphasis based on reports from 11 brokerage firms in descending order by the estimate of net profit (in INR million):
| Brokerage firm | Net Sales | Net Profit | EBITDA | Revenue (mln $) | % EBIT margin |
| Anand Rathi Share and Stock Brokers Ltd. | 35,630.00 | 4,577.00 | -- | -- | -- |
| Motilal Oswal Financial Services Ltd. | 35,576.00 | 4,337.00 | 6,226.00 | 421.00 | 15.20 |
| Nuvama Wealth Management Ltd. | 35,584.00 | 4,300.00 | 6,535.00 | 421.00 | 15.40 |
| Kotak Institutional Equities | 35,723.00 | 4,254.00 | 6,502.00 | -- | -- |
| Prabhudas Lilladher Pvt. Ltd. | 35,600.00 | 4,200.00 | -- | 420.90 | -- |
| Centrum Broking Ltd. | 35,605.00 | 4,189.00 | -- | -- | 15.10 |
| HDFC Securities Ltd. | 35,850.00 | 4,180.00 | -- | 424.00 | 15.20 |
| Emkay Global Financial Services Ltd. | 35,977.00 | 4,107.00 | 6,656.00 | -- | -- |
| Indsec Securities and Finance Ltd. | 35,800.00 | 4,100.00 | -- | 400.00 | 15.00 |
| Nirmal Bang Equities Pvt. Ltd. | 35,616.00 | 3,849.00 | -- | 421.00 | 14.80 |
| JM Financial Institutional Securities Pvt. Ltd. | 29,922.00 | 3,554.00 | 5,232.00 | -- | -- |
| Average | 35,171.18 | 4,149.73 | 6,230.20 | 417.98 |
End
US$1 = INR 86.32
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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