Mphasis (MPHL IN) – Company Update – Re-rating on the card – BUY

We are upgrading MPHL to ‘BUY’ led by steady and consistent performance, attributed to an elevated deal TCV and robust conversion. Despite the fact the deal funnel seems to be encouraging for both BFS (+45% YoY) and non-BFS (+139% YoY) in Q2FY26. More importantly, the pain within Logistics & Transportation (L&T) has subsided, the vertical performance should see a progressive turnaround through H2FY26 and FY27, driven by focused investment in potential accounts. Ex-L&T, USD revenue grew by 15.7% YoY in H1FY26, during which L&T saw ~55% YoY decline. Ex-L&T, USD revenue reported a CQGR of 3.5% and 2.5% over the past 4 and 8 quarters, respectively, which is encouraging considering the current volatile environment. (1) Investments in scaling TAM (beyond BFS), (2) onboarding of senior leaders (in Q2FY25) for securing large strategic deals, and (3) focus on products and accelerators to augment new-age offerings, have supported MPHL win strategic accounts and demonstrate value proposition. Additionally, we believe that any further cuts in US interest rates would be an incremental trigger for volume uptick in the Mortgage business for MPHL. With that, we are revising our revenue estimates upward by ~100bps/~200bps for FY27E/FY28E, while keeping our margin estimates unchanged, which translates to an EPS upgrade of 1%/3%. Given its relative outperformance and 15% earnings CAGR over FY26-28E, we are upgrading PE multiple to 27x (25x earlier) with TP of Rs. 3,310. Upgrade to ‘BUY’ (‘Accumulate’ earlier).