23 Jul , 2021 By : Kanchan Joshi
IT services provider Mphasis Ltd saw stellar performance in the June quarter. In constant currency terms, its revenue grew 5.9% on a sequential basis, ahead of analysts' expectations.
Revenue growth was led by its direct business vertical, while the DXC revenue declined on a sequential basis and remains a pain point. DXC forms around 9% of Mphasis' overall revenue.
On the deal wins front, it saw robust deal booking of $505 million in the quarter, up 92% year-on-year with 85% of deal wins in new generation services. According to the company's management, this is the highest ever deals won in a quarter.
However, the company won six clients in the quarter compared to eight in Q4FY21.
Reacting to the earnings, the stock surged 10% on the NSE in Friday's opening trade to hit a new 52-week high of Rs2,637.
While deal wins were strong, operating margins saw some compression. Ebit margin declined by 20 basis points sequentially to 15.9%. One basis point is one-hundredth of a percentage point.
Analysts say, the decline in margins was largely in line with estimates due to the wage hike, but its impact was mitigated through a reduction in SG&A. The company's total headcount increased by around 2,000 to 34,396.
"Overall, strong result with revenue above estimate and Ebit margin along the expectation. Deal booking remains strong and offers strong revenue growth visibility. Margin pressure is likely to increase with higher attrition going ahead," analysts at Yes Securities Ltd said.
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