Add Mphasis Ltd For Target Rs. 2,935 By Choice Broking Ltd
AI-Led Growth Momentum Intact
Robust Pipeline across Key Verticals Reflects AI-led Acceleration
In the past two years, MPHASIS accelerated its AI journey backed by its proprietary platforms such as NeoZeta, NeoCrux, NeoSaBa and NeoIP. The company’s overall pipeline is 69% AI-led and since its launch, the AI pipeline has grown by 2.4x. The deal pipeline is up 9% QoQ and 97% YoY, with BFS pipeline up 45% YoY, non-BFS pipeline up 139% YoY and large deals pipeline up 180% YoY. Given the robust AI led pipeline & steady rate of deal conversions we believe, MPHASIS to witness sustained growth going forward. Hence, we have revised our estimates and expect Revenue/EBIT/PAT to expand at a CAGR of 10.3%/ 12.4%/ 11.7% over FY25–FY28E. Given this outlook, we maintain our ‘ADD’ rating on the stock with a target price of INR 2,935, taking the average of FY27E and FY28E EPS of INR 117.4.
MPHASIS Reports Steady Q2FY26 with in-line Estimates
* Reported Revenue for Q2FY26 stood at USD 442Mn up 1.1% QoQ (vs CIE est. at USD 446Mn), while in CC terms revenues grew by 1.2% QoQ. In INR terms, revenue stood at INR 39,019Mn, up 4.5% QoQ.
* EBIT for Q2FY26 came in at INR 5,959Mn, up 4.4% QoQ (vs CIE est. at INR 5,993Mn), while EBIT margin was almost flat QoQ to 15.3% (vs CIE est. at 15.4%).
* PAT for the quarter came in at INR 4,691Mn, up 6.2% QoQ (vs CIE est. at INR 4,722Mn).
AI-Led Offerings and Deal Conversions to Augur Steady Growth
MPHASIS reported strong TCV growth of 155% YoY, reaching USD 520Mn in Q2FY26, with 69% of the pipeline being AI-led (vs. 35% in Q2FY25). The quarter included six large deals—one over USD 100Mn with a new BFS client and two over USD 50Mn. Deal conversion remained strong as the company reported a steady growth of 1.1% QoQ to USD 442Mn in Q2FY26 led by 2.2% QoQ growth in Direct business. In CC terms, TMT was the top-performing vertical with 9.1% QoQ growth. BFS declined marginally by 0.7% QoQ, while Insurance grew by 4.4% QoQ. Logistics & Transportation declined 55.1% QoQ due to customerspecific investment pauses. Among services, ITO rose 7.0% QoQ, BPO and APPS rose 2.4% and 1.4%, respectively. Regionally, Americas grew 2.1% QoQ, EMEA by 7.5% QoQ, while ROW declined by 3.5% QoQ. We believe that the company would continue to deliver >2x of industry growth, with strong deal conversion and growth in AI led pipeline.
EBITM guidance maintained at 14.75%–15.75%
Mphasis reported a flat EBIT margin of 15.3% in Q2FY26, supported by a 400 bps QoQ rise in offshore utilisation to 86% and a continued shift toward fixedprice projects (42.7% vs 43.1% in Q1FY26). This drove higher productivity and non-linear revenue growth despite a net headcount reduction of 254 (total 30,809). The logistics and transportation vertical saw a temporary margin hit due to a one-time client-specific investment, expected to normalize ahead.
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SEBI Registration no.: INZ 000160131
