07 Nov

The Behaviour Gap

Coined by Carl Richards, “the behaviour gap” refers to the difference between smart financial decisions versus what we actually decide to do. Many people miss out on higher returns because of emotionally driven decisions, creating a gap — “the behaviour gap” — between their lower returns and what they could have earned had they not made an emotional decision.

What Causes the “Behavior Gap”?

#1: Excitement From Good Markets/Good News Many investors may feel tempted to increase their risk or capitalize on rising stocks when stocks are moving higher (aka ‘performance chasing’). This can lead to investors constantly readjusting their portfolios as the market moves higher. An investor who follows such patterns is likely to do the same with declines. This is a clear form of trying to time the market. Trying to consistently nail tops and bottoms in the market is a fool’s game.

#2: Fear From Bad News/Bad Markets As a response to COVID-19 and the market volatility that ensued, we saw a lot of investors flee to safer investments or move out of the market completely. All-in or all-out decisions in the market is hardly ever a good idea and caused investors to miss the subsequent recovery. When stocks are low, a common response may be to sell and effectively miss out on potential long-term gains.

#3: Trying to “Beat the Market” Many investors seek the help of a financial advisor to achieve above-average returns and “beat the market”, otherwise known as “alpha.” However, in this search for “alpha,” our humanness — our emotions and our behaviours — may cause us to do the exact opposite.

#4: Focusing on the Day-to-Day Sometimes it’s hard to focus on the bigger picture when things are running haywire in the short-term. It’s easy to get caught up in “today” and lose sight of “tomorrow”. However, making a rash decision can inhibit the long-term benefit that comes from maintaining a balanced perspective without reactionary behaviour. Your investments will thank you for trying your hardest to keep the end game in mind.

How to Not Fall Victim to the Behavior Gap
The stock market is going to go up. It’s going to go down. For long periods of time, the market will seemingly go nowhere. All of these are okay. In regards to the current crisis of COVID-19, many aspects are out of our control, but one thing we can control right now is how we handle our financial strategy. If you’re experiencing financial anxiety in response to the pandemic or potentially the presidential election, take a breath. Remember the potential for long-term gains. Of course, you can and should always reach out to your advisor for further clarification and reassurance.

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06 Nov

Most landlords’ waived rents; costs down 75% – PVR

Update on the Indian Equity Market: On Thursday, NIFTY closed in green at 12,120 (+1.8%). Top gainers in NIFTY50 were IndusInd bank (+6.2%), Hindalco (+6.0%), and SBI (+5.6%). The top losers were Hero Motocorp (-0.6%), and HDFC Life (-0.2%). Top sectoral gainers were METAL (+4.4%), MEDIA (+4.0%), and PSU BANK (+2.9%) and the only sectoral loser was REALTY (-0.5%).

Excerpts of an interview with Mr. Nitin Sood, CFO, PVR with CNBC dated 4th November 2020:

• Multiplex chain PVR managed to reduce losses in the second quarter despite nil revenues from the core movie exhibition business with the exception of one property in Colombo.
• The big focus for them right now as revenues have been nil is to really reduce their fixed cost and they have managed to do that.
• They have brought down their fixed cost down by almost 75-80 percent. One of the big success that they have also managed to achieve is also to speak to their landlord partners and they have been able to get rent waivers from most of their landlords for the period they have been shut.
• Further cost reductions were not possible, but there was enough liquidity on the company’s balance sheet for now.
• The next major milestone would be the opening up of screens in Maharashtra, which accounts for roughly 25 percent of multiplexes’ revenues.
• Maharashtra is a very key state for Hindi film releases because it contributes about 20-25 percent of the revenue of Hindi films. They are hoping that they will get permission soon to open in Maharashtra.
• Maharashtra government has been wary of opening up of cinema halls, fearing a fresh outbreak of COVID cases, especially with the festive season underway.
• Mr. Sood said the first 6-8 weeks after reopening is expected to be challenging.

Consensus Estimate: (Source: market screener and investing.com websites)
The closing price of PVR was ₹ 1,227/- as of 5th November 2020. It traded at -12x/ 43x/ 20x the consensus earnings estimate of ₹ -105/ 28.6/ 60.7 for FY21E/22E/23E respectively.
The consensus price target of PVR is ₹ 1,359/- which trades at 22x the earnings estimate for FY23E of ₹ 60.7 /-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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05 Nov

Covid tailwinds led to a 50% growth in Healthcare – Dabur India

Update on the Indian Equity market:
Amid the uncertainty surrounding the US Presidential election outcome, Indian markets remained volatile on Wednesday. The Nifty50 ended marginally higher at 11,909 (+0.8%). Among the stocks, INDUSINDBK (+4.9%), SUNPHARMA (+3.7%), and DIVISLAB (+3.6%) ended the day higher. UPL (-3.9%), AXISBANK (-2.6%), and HDFC (-2.2%) led the losers. Among the sectoral indices, PHARMA (+2.2%), IT (+1.8%), and AUTO (+0.7%) led the gainers. REALTY (-1.9%), METAL (-0.3%), and FINANCIAL SERVICES 25/50 (-0.1%) led the losers.

Excerpts of an interview of Mr. Mohit Malhotra, CEO, Dabur India published in Mint on 4th November 2020:
• Dabur India recently reported 2QFY21 numbers with ~17% domestic volume growth compared to a year ago. There has been an all-around recovery- economy, rural, urban opening up, modern trade opening up, and e-commerce.
• Healthcare got a tailwind and continues to do well; home and the personal care portfolio have seen a sequential recovery in all the sub-categories.
• Healthcare has grown by 50%, out of which health supplements grew by 70%. That is the one that has driven growth.
• Consumption is very muted and the whole mindset is about saving and not splurging. That is why most discretionary products have not yet picked up. In-home consumption continues and this will sustain over a period of time.
• This quarter, the contribution of new products was ~5-6%. The new product launches are not just in categories but also specific to channels, such as e-commerce first products. Dabur is also trying to get into adjunct categories around its power brands, so it is both line and brand extensions. These new launches have also helped drive growth in revenue.
• Covid-19 has been an inflection point for Dabur. There are some fundamental changes being made, in both go-to-market and the way they look at categories, and capitalizing on the opportunities. Capitalizing on e-commerce will help connect with the millennials and urban consumers while strengthening the rural distribution will help resonate with the rural consumer.
• The casual labor force suffered the most due to the outbreak of the virus and they were the ones who went back. Since that labor didn’t come back, there was some hiring from the remote parts of Jharkhand and some other states. Initially, there was some productivity fall and now, post-training, they are at 100% of pre-covid levels.
• The rural growing significantly ahead of urban is expected to continue for a while.

Consensus Estimate: (Source: market screener website)
• The closing price of Dabur India was ₹ 519/- as of 04-November-2020. It traded at 55x/ 48x/ 42x the consensus earnings estimate of ₹ 9.5/ 10.9/ 12.4 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 544 implies a PE multiple of 44x on FY23E EPS of ₹ 12.4/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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04 Nov

Demand strong ahead of festive and wedding season – Asian Paints

Update on the Indian Equity Market:
On Tuesday, Nifty ended 1.2% higher at 11,813 led by the financial & metal stocks. The top gainers for Nifty 50 were ICICI Bank (+6.7%), Hindalco (+5.1%) and SBI (+4.3%) while the losing stocks for the day UPL (-6.6%), NTPC (-3.8%) and Reliance (-1.3%). Top gaining sectors were Bank (+3.2%), Financial Services (+3.1%) and Pvt Bank (+3.1%) while the losing sectors for the day were Realty (-2.3%), and Media (-0.3%).

Edited excerpts of an interview with Mr Amit Syngle, MD & CEO, Asian Paints; dated 02nd November 2020 from CNBCTV18:

Demand has been buoyant in the festive season, according to Mr Syngle. He further added that staying at home has made people desire home improvement.

The Company is seeing a very strong growth trend because of the festivals coming in with the wedding season which is also around. So both these factors are giving very strong flavour to the market and that is the trend they are seeing in October as well.

Mr Syngle said that demand in tier-II, III and IV cities has been exceptional. The luxury segment in rural areas was picking up too.

The company sees demand from metros close to about 85% of the pre-COVID levels. For Tier-III and tier-IV, it sees a strong jump in terms of demand even better than pre-COVID times.

Mr Syngle added that the home décor business was growing much faster on a low base.

According to him, Asian Paints is not about just owning the walls, but space between the walls. The Company sees that trend coming in strongly and he sees a definite pick up in September in terms of people embellishing their homes not only with respect to walls but even with respect to the other areas which fill up space in the home.
Asian Paints is open to acquisitions that will bring in synergistic benefits.

Talking about the quarterly result he said, 3Q margins may be better than 2Q on stable inputs. The Company has lately witnessed input costs moving up due to demand.

Consensus Estimate: (Source: market screener website)

The closing price of Asian Paints Ltd was ₹ 2,158/- as of 03-November-2020. It traded at 74x/ 52x/51x the consensus book value estimate of ₹ 29.2/36.4/42.4 for FY21E/ FY22E/ FY23E respectively.

The consensus target price of ₹ 2,086/- implies a PE multiple of 49x on FY23E EPS of ₹ 42.4/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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03 Nov

Revenue growth across segments expected to continue– Laurus Labs

Update on the Indian Equity Market:

On Monday, Nifty closed 0.2% higher at 11,669. Within NIFTY50, INDUSINDBK (+6.5%), ICICIBANK (+6.0%), and AXISBANK (+6.0%) were the top gainers, while RELIANCE (-8.7%), DIVISLAB (-2.8%), and EICHERMOT (-2.5%) were the top losing stocks. Among the sectoral indices, PRIVATE BANK (+4.2%), BANK (+4.2%) and FINANCIAL SERVICES (+3.9%) were the top gainerswhileIT (-0.9%), PHARMA (-0.6%), and AUTO (-0.3%) were the top losing sectors.

Revenue growth across segments expected to continue– Laurus Labs

Excerpts of an interview with Mr. Satyanarayana Chava, Founder & CEO, Laurus Labs, aired on CNBC-TV19 on 30th October 2020:
● In 2QFY21, LAURUSLAB’s revenue growth came from all three divisions and management expects that trend to continue.
● Management has very good visibility of revenue growth going forward.
● Management also expects to maintaingross margins and EBITDA margin. The EBITDA margin is expected to be maintained within the 1HFY21 band of 29%-33%. However, Management refrained from giving any numerical guidance.
● LAURUSLAB’s net debt as of 30th September 2020 is Rs 20,000 mn. Management does not want to bring down the net debt beyond this level as there is a large capacity expansion plan on cards.
● Based on the revenue visibility and order book level, investment in additional capacity is required. Over the next 24 months, management expects a capital outlay of Rs 12,000 to 15,000 mn. The capacity expansion will be done using internal accruals and no external funds will be raised.
● LAURUSLABS has an annualized net debt to equity ratio of 0.85x so they are not highly leveraged. So,the decision to not reduce the net debt levels will not hurt the company.
● Recently the rules have been relaxed in the production linked incentives (PLI) scheme for Active Pharmaceutical Ingredients (APIs), drug intermediaries, and medical devices. LAURUSLABS has some products where they could get benefit from the modified norms of the PLI scheme, but it will not be very significant.

Consensus Estimate (Source: market screener website)
● The closing price of LAURUSLABS was ₹ 301/- as of 2-November-2020. It traded at 18.1x/ 20.6 x/ 13.1x the consensus EPS estimate of ₹ 16.6/14.6/22.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 309/- implies a PE multiple of 13.5x on FY23E EPS of ₹22.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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02 Nov

E-commerce sales doing well – Blue star

Update on the Indian Equity Market:
On Friday Nifty closed 0.24% lower at 11,642. Among the sectoral indices Metal (+1.6%), Media (+1.5%), and IT (+0.2%) closed higher. Auto (-1.1%), Private Bank (-0.9%), and FMCG (-0.8%) closed lower. Bharti Airtel (-4.0%), Hero Motocorp (-3.1%), Maruti (-2.5%), closed on a negative note. Adani Ports (+4.5%), BPCL (+3.5%), and Coal India (+3.4%) were among the top gainers.

Excerpts from an interview of Mr. Vir Advani, VC & MD, Bluestar with CNBC-TV18 dated 29th October 2020:

● On cost-cutting, Mr. Advani said the revenue recovered 72% as compared to the same quarter last year and EBITDA recovered 75 percent. The Company was able to sustain the margins. It was supported by overheads and changes in the cost structure.
● The company has made some structural changes to the cost structure which will help to save costs in the current year as well as next year.
● On business, he said in projects the recovery is still slow which ~ 60-65% of last year is. The project sites have not fully opened and there is a tight cash position in some customers.
● On the retail side, he said there are some green shoots visible. For September month the recovery is high at 90%. The company is looking to reach a 90% level of last year’s demand in Q3. The company expects a normal Q4.
● The company has held on to the Market share of ~12.8% as they had strong sales in Tier II & III.
● E-commerce sales are doing well for the company.
● In 1HFY20 the online sales were 3% of the company’s sales, in 1HFY21 it crossed 13%. Water purifiers are doing better and ~75% of Water purifier sales happening online.
● The company has made progress on the working capital front. The company generated Rs100 cr of positive cash flow on a standalone basis.
● On Exports, he said the company has reached 90% of last year on an H1 basis and expects growth in FY21E on exports.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Blue star was ₹ 629 as of 30-October-2020. It traded at 59x/ 34x/ 25x the consensus Earnings per share estimate of ₹ 10.7/18.7/25.0 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Blue star is ₹ 566/- which implies a PE multiple of 23x on FY23E EPS of ₹25/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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30 Oct

Expect impact of high rubber prices in 4QFY21 – Ceat

Update on the Indian Equity Market:
The Indian markets witnessed a volatile monthly expiry day as Nifty opened the day higher but managed to close 57 points lower at 11,673. Within the index, the gainers were led by ASIANPAINT (3.1%), TECHM (2.2%), and ULTRACEMCO (2.0%) whereas LT (-4.9%), TITAN (-3.4%), and ONGC (-2.9%) were the laggards. Among the sectoral indices, only IT (0.5%) closed the day in green while MEDIA (-1.7%), AUTO (-1.1%), and PHARMA (-0.9%) led the laggards.
Excerpts of an interview with Mr. Anant Goenka, Managing Director, Ceat Ltd (Ceat) published on CNBC-TV18 dated 28th October 2020:
The company is witnessing a very large demand in the months of October and November from the Original Equipment Manufacturers (OEM). The demand seems challenging from 4QFY21E onwards.
Raw material prices are inching up for the past few days. The increased rubber prices will start coming into effect around 4Q onwards. This will have a negative impact on margins.
He said that the rural economy has done well for the company. The farm sector has shown 50-60 percent growth in the replacement segment. The revenues are also back to 90 percent of pre-COVID levels. The higher demand is a mix of pent-up demand and a lot of other aspects.
The higher profitability margins during 1HFY21 were led by favorable mix and t is expected to come down in 2nd half of FY21E.
The company has completed a capex of Rs 2,500-3000mn YTD (Year-to-Date) and the figure will be around Rs 5,000mn by the end of FY21E and Rs 6,000 mn for FY22E.
Ban on Chinese tyres has impacted the PCR replacement demand. However, he said that OEMs are allowed to import Chinese tyres.
Consensus Estimate: (Source: market screener website)
The closing price of Ceat was ₹ 1,123/- as of 29-Oct-2020. It traded at 22x/ 16x/ 14x the consensus EPS estimate of ₹ 51/ 72/ 78 for FY21E/ FY22E/ FY23E respectively.
The consensus target price of ₹ 1,014/- implies a P/E multiple of 13x on FY23E EPS of ₹ 78/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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29 Oct

Operations back to pre-Covid levels – JSW Steel

Update on the Indian Equity market:
Amid weak global cues from spiking Covid-19 cases worldwide and uncertainty over the US presidential election, Nifty 50 ended 1.3% lower at 11,730 on Wednesday. Among the stocks, BHARTIARTL (3.4%), UPL (+2.8%), and M&M (+1.2%) led the gainers while HDFC (-3.5%), INDUSINDBK (-3.2%), ICICIBANK (-3.2%) led the losers. None of the sectoral indices ended the day in the green. FINANCIAL SERVICES (-2.3%), PRIVATE BANK (-2.2%), FINANCIAL SERVICES 25/50 (-2.1%) led the losers.

Excerpts of an interview of Mr. Seshagiri Rao, Joint MD, and CFO, JSW Steel with Financial Express on 27th October 2020:
• JSW Steel reported strong numbers for the September quarter with improvement in revenues and margins. Volumes were significantly better, both on a YoY and MoM basis. There has been a strong recovery in business activity as compared to 1QFY21. Although there are certain seasonal factors that impact demand in 2Q the overall environment is upbeat and expects the second half to see strong growth momentum.
• There is a very good improvement with regards to offtake by the auto sector. The revival in the auto sector was unexpected and sales to the auto industry went up 33% YoY.
• Although the commercial sector is still lagging, tractors, two-wheelers, and passenger vehicles are doing reasonably well. The demand is not expected to weaken in 2HFY21, on account of the festive season and the government’s attention to give fiscal stimulus. Demand will definitely see an MoM improvement, though YoY improvement will still take some time.
• There is good traction in the coated steel products, appliances, packaging, solar and government-aided projects. Rural demand is resilient and good monsoon and government initiatives will improve demand further.
• Long product demand was impacted by the monsoon and remained low. Construction activity has gained pace now and both 3Q and 4Q are expected to see good demand. Packaging and color-coated areas saw good offtake, which is expected to continue the rest of the year.
• Operations are back to pre-Covid levels and achieved average capacity utilization of around 86% in the quarter, versus 85% in 2QFY20. There were some disruptions due to the unavailability of iron ore and due to the increase in exports, evacuation of iron ore from other mines remained a challenge. The company is hopeful of the situation normalizing in the next quarter.
• In the second quarter, the steel prices have gone up by 11% and international prices have gone up by 16%. There has been an improvement in sales realizations, though realizations in India are increasing at a slower pace compared to that globally.
• The costs during the quarter were lower on account of the natural gas price which has come down. The power cost is lower because thermal coal prices have come down. Iron ore prices have gone up due to supply constraints. They will be able to reduce the cost of transporting iron ore from the mine to the railway siding, to an extent. They are also working on reducing the mining costs and want to set up a slurry pipeline to bring iron ore from the mine to the port. Though that will take time, once construction is completed, logistics costs will reduce drastically.
• The share of value-added and special products has now increased substantially to 51% of sales volume. There is substantial demand for color-coated products is on the rise from steel-using industries. There are plans to expand capacities at the Vasind, Tarapur, and Kalmeshwar plants by the end of this financial year.
• Once the high margin business like Asian color coated started coming in, margins will also get a lift.
• The NCLT has given approval for the plan to acquire the Asian Colour Coated Company. They are awaiting the final order to see if there are any modifications.
• They expect the Bhushan Power and Steel resolution to be settled by December 2021.

Consensus Estimate: (Source: market screener website)
• The closing price of JSW Steel was ₹ 306/- as of 28-October-2020. It traded at 18x/ 12x/ 10x the consensus earnings estimate of ₹ 17.3/ 26.3/ 30.4 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 303 implies a PE multiple of 10x on FY23E EPS of ₹ 30.4/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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28 Oct

Goal is to reach double-digit growth in enterprise vertical in FY22: Tech Mahindra

Update on the Indian Equity Market:
On Friday, NIFTY closed in green at 11,889 (+1.0%). Top gainers in NIFTY50 were Kotak bank (+11.7%), Nestle (+5.9%), and Asian Paints (+5.7%). The top losers were HDFC (-2.1%), TCS (-2.0%), and ONGC (-1.8%). Top sectoral gainers were PVT BANK (+3.1%), BANK (+2.9%), and FIN SERVICES (+2.2%) and sectoral losers were IT (-1.1%), PSU BANK (-0.9%), and REALTY (-0.7%).

Excerpts of an interview with Mr. Manoj Bhat, CFO , Tech M with CNBC dated 26th October 2020:
• Reaching doubt-digit revenues growth would be their goal.
• They have seen bottoming out of the manufacturing, they have seen BSFI doing fairly well, and the other verticals like retail and healthcare are also doing okay so most of the components are doing well.
• Tech Mahindra’s second-quarter earnings beat estimates with the non-telecom business driving growth this time. The telecom recovery is still muted.
• In the telecom segment, the recovery in their client base is a bit slower so they do anticipate in coming one or two quarters they should start to see that normalise.
• 5G is probably something which will happen in FY22.
• Interestingly the whole ecosystem around 5G in terms of phones, in terms of devices, that is something which has seen a good amount of traction.
• A look at the deal funnel suggests it is almost at all-time high. Within that, what they are seeing is more traction in slightly smaller deals because decision-making by them has started moving at a faster pace.
• Larger ones will probably pan out in the next couple of quarters.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of TECHM was ₹ 828/- as of 27th October 2020. It traded at 17x/ 15x/ 13x the consensus earnings estimate of ₹ 49.2/ 56.0/ 63.6 for FY21E/22E/23E respectively.
• The consensus price target of TECHM is ₹ 942/- which trades at 15x the earnings estimate for FY23E of ₹ 63.6 /-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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27 Oct

Prioritizing growth over margin expansion– Mphasis

Update on the Indian Equity Market:

On Monday, Nifty closed 1.4% lower at 11,768. Within NIFTY50, HDFCLIFE (+3.2%), NSETLEIND (+2.6%), and KOTAKBANK (+2.0%) were the only gainers, while HEROMOTOCO (-6.7%), BAJAJ-AUTO (-6.0%), and HINDALCO (-5.3%) were the top losing stocks. All the sectoral indices closed with losses led by METAL (-3.5%), AUTO (-3.2%), and MEDIA (-2.7%).

Prioritizing growth over margin expansion– Mphasis

Excerpts of an interview with Mr. Nitin Rakesh, MD & CEO, Mphasis, aired on CNBC-TV19 on 23rdOctober 2020:
● Mphasis delivered a strong growth in Direct Core segment in 2QFY21. The growth has been broad based and there are several drivers of this growth:
1. 2QFY21 was the 3rd consecutive quarter of $ 200mn+ net TCV deal wins. 2QFY21had highest ever TCV deal wins of $ 360mn. The momentum of deal wins is translating in good growth for the direct core channel.
2. Mphasis has seen good growth in existing strategic accounts as well as from new clients. Growth from new clients was 30% YoY in 2QFY21.
3. Mphasis has also been enjoying strong growth for the past 6 quarters from their European business. European business revenue growth was ~27%-28% YoY for 2QFY21.
● Mphasis has already crossed the pre-pandemic peak revenue in 2QFY21 itself. Mr Rakesh expects that the current growth trajectory should continue and Mphasis can deliver mid to high single digit revenue growth for FY21E.
● Mphasis’s MRC (Minimum Revenue Commitment) from strategic account of DXC expires in Sep-21. They still have $ 200 mn to be consumed in next 4 quarters. Post that, DXC channel will become like any other client for Mphasis and management is not worried about retaining the clients.
● Mphasis has stuck to their EBIT margin guidance band of 15.5%-16.5%. Management’s philosophy going into FY21 has been to maximize the growth potential in the market considering a lot of Mphasis’ digital capabilities are in high demand. Mphasis has prioritized growth over margin expansion, at the same time held margins steady.
● Mphasis istaking the margin operating efficiencies and re-investing it back into competency building, sales expansion, and investingin ramp up of recent deal wins.

Consensus Estimate (Source: market screener website)
● The closing price of MPHASIS was ₹ 1,356/- as of 26-October-2020. It traded at 20.7x/ 17.9x/ 15.8x the consensus EPS estimate of ₹ 65.6/75.8/85.7 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 1,483/- implies a PE multiple of 17.3x on FY23E EPS of ₹85.7/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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