MPHASIS - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 4.0

• 📈 Revenue Growth: Quarterly PAT improved from ₹298 Cr to ₹393 Cr (+5.63%), showing steady growth
• 💰 Profit Margins: Strong, ROE at 25.2% and ROCE at 33.7%
• ⚖️ Debt Ratio: Debt-to-equity at 0.09, very low leverage
• 💵 Cash Flows: EPS of ₹75.6, robust earnings base
• 📊 ROE/ROCE: Excellent efficiency, well above industry averages
• 📉 Valuation: P/E 38.3 vs Industry PE 26.4, trades at a premium
• 📚 Book Value: ₹307, P/B ~9.4
• 📈 PEG Ratio: 5.24, indicates stretched valuation relative to growth
• 💻 Business Model: IT services provider specializing in digital transformation, cloud, and enterprise solutions
• 🛡️ Competitive Advantage: Strong client relationships, niche expertise in BFSI and digital services, debt-free structure

Positive

• ✅ Strong ROE (25.2%) and ROCE (33.7%)
• ✅ Debt-to-equity ratio at 0.09, nearly debt-free
• ✅ EPS of ₹75.6 supports valuation strength
• ✅ Institutional support with DII holdings increased (+0.57%)

Limitation

• ⚠️ P/E ratio (38.3) above industry average (26.4)
• ⚠️ PEG ratio at 5.24 indicates stretched valuation
• ⚠️ FII holdings reduced (-0.47%)
• ⚠️ P/B ratio ~9.4, premium valuation

Company Negative News

• 📉 Reduction in foreign institutional investor holdings
• 📉 Valuation premium compared to peers

Company Positive News

• 🌍 Expansion in digital transformation and cloud services
• 💡 Strong quarterly PAT improvement vs previous quarter
• 📈 Increased DII holdings (+0.57%)

Industry

• 💹 Industry PE at 26.4, Mphasis trades at a premium
• 📈 IT services sector supported by digital transformation demand and global outsourcing trends

Conclusion

Mphasis shows strong fundamentals with debt-free operations, high ROE/ROCE, and steady profit growth. However, valuations are stretched with high P/E, P/B, and PEG ratios. Entry zone is attractive around ₹2,700–2,800 (close to DMA 200 support). Long-term holding is favorable if earnings growth continues and digital transformation demand expands globally, but caution is advised due to valuation risks.

Would you like me to extend this into a peer benchmarking overlay comparing Mphasis with Coforge, Persistent Systems, and L&T Technology Services, or should we run a sector rotation scan to identify stronger compounding opportunities across IT services and digital transformation plays?