Mphasis Stock Skyrockets: Major Broker Issues 'BUY' Upgrade With Stunning New Target Price!

Prabhudas Lilladher has initiated a 'BUY' recommendation for Mphasis, signaling strong confidence in the IT services company's performance and future prospects. The upgrade comes as the firm observes steady and consistent operational results, bolstered by elevated deal Total Contract Value (TCV) and robust conversion rates.

Key Developments

• Strong Deal Pipeline: The deal funnel appears encouraging for both the Banking, Financial Services (BFS) segment, which saw a 45% year-on-year (YoY) increase, and the non-BFS segment, up 139% YoY in Q2FY26.
• Logistics Turnaround: Importantly, Prabhudas Lilladher believes the challenges within the Logistics & Transportation (L&T) vertical have begun to subside. A progressive turnaround is anticipated through the second half of FY26 and into FY27, supported by focused investments in key accounts.
• Excluding L&T Growth: Excluding the L&T segment, Mphasis demonstrated significant growth, with USD revenue increasing by 15.7% YoY in the first half of FY26. During this period, the L&T vertical experienced a decline of approximately 55% YoY.
• Consistent Performance: Even with market volatility, the company's revenue growth outside of L&T has been consistent, reporting a Compound Annual Growth Rate (CAGR) of 3.5% over the past four quarters and 2.5% over the last eight quarters.

Outlook and Price Target

Given Mphasis's relative outperformance and an expected 15% earnings CAGR over FY26-28E, Prabhudas Lilladher has revised its valuation.

• Valuation Increase: The Price-to-Earnings (PE) multiple has been upgraded to 27x from the previous 25x.
• New Target Price: The target price (TP) for Mphasis has been set at ₹3,310.
• Rating Change: The rating has been upgraded from 'Accumulate' to 'BUY'.

Impact

This upgrade is expected to positively influence Mphasis's stock price, potentially attracting more investors and reinforcing market confidence in the company's strategic direction. It may also create positive sentiment across the broader Indian IT sector, especially for companies focused on similar growth drivers like deal conversion and vertical specialization. The focus on turning around the Logistics segment indicates a strategic approach to improving overall company performance.

Impact Rating: 7/10

Difficult Terms Explained

• Deal TCV (Total Contract Value): The total value of a contract signed between a company and its client, representing the total expected revenue over the contract's duration.
• Robust Conversion: The ability of a company to successfully convert sales leads or potential deals into actual secured contracts and revenue.
• BFS (Banking, Financial Services): Refers to companies operating within the banking, financial services, and insurance sectors.
• Non-BFS: Refers to clients and business segments outside of the traditional Banking, Financial Services, and Insurance sectors.
• L&T (Logistics & Transportation): The business segment dealing with the movement of goods and people from one place to another.
• YoY (Year-on-Year): A comparison of a metric from the current period to the same period in the previous year.
• CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment over a specified period, assuming profits are reinvested.
• PE Multiple (Price-to-Earnings Multiple): A valuation ratio that compares a company's stock price to its earnings per share. It helps investors determine the relative value of a stock.
• TP (Target Price): The price at which a stock analyst or brokerage firm believes the stock will trade in the future.
• Accumulate: An investment recommendation suggesting investors should buy more of the stock as opportunities arise, but not necessarily in large quantities at once.