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Resilient performance, aided by investments

MPHL delivered a healthy Q1FY27 performance with revenue growth of 2.1% QoQ CC, above our estimate of 1.3%, driven by continued ramp-up of large deals and incremental contribution from OKIN integration (strategic client’s contractor). Demand remained resilient with sustained momentum in BFS & recovery in TMT, while Insurance witnessed moderation after four quarters of strong growth, with management expecting growth momentum to resume over the coming quarters. Deal momentum remained robust with net new TCV of US$461mn (63% AI-led), marking the 5th consecutive quarter of US$400mn+ TCV wins, with a record pipeline. Management expects Q2FY27 to deliver the strongest sequential CC growth in the last 3 years, (implying growth of 2.9%+ QoQ CC), supported by continued large-deal ramp-ups and the expected contribution from the Red Oak contract acquisition. Management also view targeted customer contract acquisitions as a scalable, low-risk inorganic element to stimulate organic growth. EBIT margin declined 60bps QoQ to 14.8%, below our estimate of 15.3%, primarily due to large deal ramp-up costs, ~35bps of acquisitionrelated expenses (one-off) and lower utilization (down 300 bps QoQ). While management reiterated its FY27 EBIT margin guidance of 14.75–15.75%, aided by improving utilization and normalization of deal ramp-up & acquisition-related costs over the remainder of the year. We maintain our FY27E/FY28E revenue growth estimates of 9.0%/10.7% YoY CC aided by Q2 outlook and robust deal conversion drive our confidence. However, we reduce our FY27E/FY28E EBIT margin estimates by 10bps each to 15.3%/15.4%, resulting in a 2.9%/1.4% cut to our FY27E/FY28E EPS estimates. We also lower our target multiple to 22x FY28E EPS (23x earlier) to arrive at revised TP of INR 2,820. Retain BUY

Revenue:

Reported Q1FY27 rev. of US$471mn, up 2.1% QoQ in CC, above our estimate of 1.3%. Growth was driven by the TMT and BFS segments, which grew 15.5% and 0.7% QoQ (CC), respectively, while the Logistics & Insurance segment declined 15.7% & 3.1% QoQ (CC) respectively. Logistics segment was affected by Middle East challenges & Insurance weakness was attributed to completion of project milestones.

Operating Margin:

EBIT margin came in at 14.8%, down 60 bps QoQ, below our & consensus estimates of 15.3% & 15.4% respectively due to lower gross margin. Margins were impacted by ramp up costs of new deal wins, decline in utilization and the TAP acquisition costs (-35 bps). FY27 margin band mantained in the 14.75-15.75% range.

Deal Wins:

Deal wins momentum continued with TCV wins of US$ 461 mn (5th successive quarter of US$400mn+ deal wins), up 13.3% QoQ including 3 large deals with one US$100mn+ deal. AI led wins for Q1 stood at 63%.

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