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Growth outlook strengthens but weighs on margins

MPHL delivered a healthy Q2FY27 performance, with revenue growth of 3.3% QoQ CC, ahead of our estimate of 3.0% (ex. Logistics 3.8% QoQ growth), marking its strongest sequential growth in three years. Growth was led by BFS (+4.4% QoQ) and TMT (+9.9% QoQ), while Insurance also returned to sequential growth (+1.8%). BPO (+6.6%) and APPS (+3.5%) sustained momentum, partly offset by weakness in ITO (-4.9%) and Logistics & Transportation (-12.0%). Deal momentum remained robust, with net new TCV of US$466mn (66% AI-led), taking TTM TCV to US$1.8bn. The pipeline reached a record high, up 23% YoY, with 71% AI-led, while shorter-cycle deals (below US$20mn) grew 26% on a TTM basis, supporting near-term revenue conversion. Driven by strong deal wins and pipeline conversion, management expects H2FY27 momentum to sustain and raises its FY27 revenue growth outlook to low-double-digit. Operating margin remained flat QoQ at 14.8%, 20bps below our estimate, as a higher on-site mix in shortcycle AI projects, acquisition-related amortization and investments in IP, sales and platforms impacted margins. While management retained its 14.75–15.75% margin guidance, it indicated to prioritize growth over near-term margin optimization. Accordingly, we raise our FY27E/FY28E/FY29E revenue growth estimates to 10.0%/11.3%/10.6% YoY CC (from 9.0%/10.7%/10.8%) factoring Q2 beat and improved visibility, while lowering our operating margin estimates to 15.0%/15.1%/15.2% (from 15.2%/15.3%/15.5%), factoring in continued growth investments. We value the stock at a PE of 21x Sept. 28 earnings to arrive at revised TP of INR 2,960 (earlier 2,920) and retain our “BUY” rating.

Revenue:

Reported Q2FY27 rev. of US$486mn, up 3.3% QoQ in CC, above our estimate of 3.0%. Direct revenue up 3.5% QoQ CC and 11.3% CC. Growth was driven by the TMT and BFS segments, which grew 9.9% and 4.4% QoQ (CC), respectively, while the Logistics segment declined 11.9% QoQ (CC), having being affected by Middle East challenges.

Operating Margin:

EBIT margin came in at 14.8%, remaining QoQ, below our & consensus estimates of 15.0% & 15.2% respectively, as investments in capabilities continue, for driving the next phase of growth. FY27 margin band maintained in the 14.75-15.75% range.

Deal Wins:

Deal wins momentum continued with TCV wins of US$ 466 mn (6th successive quarter of US$400mn+ deal wins), up 1.1% QoQ including 5 large deals.

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