Whalesbook
Analyst Optimism on Mphasis Growth Trajectory
Prabhudas Lilladher has initiated coverage on Mphasis, assigning a 'Buy' rating and setting a target price of ₹3000. The firm cited robust underlying momentum and a strong Artificial Intelligence (AI) driven deal pipeline as key reasons.
The brokerage noted Mphasis delivered largely in-line Q4FY26 results, showing 2.5% revenue growth quarter-on-quarter in constant currency. This growth was driven by new deal wins in the Banking, Financial Services (BFS) and Insurance sectors, though the Technology, Media, and Telecom (TMT) segment saw some weakness. For the full fiscal year 2026, Mphasis's revenue grew 6.7% year-on-year in constant currency. Excluding the Logistics segment, affected by client-specific restructuring, underlying growth remained healthy at approximately 15.5%. This momentum reflects strong traction in top accounts and rising demand for platform-led, AI-driven transformation initiatives.
AI Capabilities Bolster Deal Pipeline
Mphasis's sustained investments in intellectual property, such as NeoIP, along with enhanced AI capabilities and a focus on large deal conversion, are proving to be key differentiators. Deal momentum was exceptionally strong through FY26, with net new Total Contract Value (TCV) reaching US$2.1 billion – a 68% year-on-year increase. Crucially, a substantial portion of these new deals are AI-led. The company's current pipeline is approximately 69% AI-driven, offering strong revenue visibility.
FY27 Outlook and Margin Considerations
Against this positive backdrop, Mphasis management has guided for high single-digit to low double-digit revenue growth in FY27. This outlook is supported by anticipated continued strength in the BFS and Insurance segments and a gradual recovery in Logistics. Prabhudas Lilladher maintains its revenue growth estimates at approximately 9% for FY27E and 10.7% for FY28E, both year-on-year in constant currency. While operating leverage from platform-led delivery is expected to support margins, the brokerage acknowledges that incremental investments in AI platforms, Go-To-Market strategies, and leadership development could moderate margin expansion. Consequently, FY28E margin estimates have been trimmed slightly, by about 10 basis points. Prabhudas Lilladher projects a USD revenue CAGR of approximately 9.7% and an INR earnings CAGR of about 15% from FY26–28E. The ₹3000 target price is based on a 23x multiple of FY28E Earnings Per Share (EPS).