MPHASIS - Investment Analysis: Buy Signal or Bull Trap?

Last Updated Time : 05 Nov 25, 7:43 am

Investment Rating: 4.2

💻 Mphasis Ltd is a fundamentally strong IT services company with excellent capital efficiency and consistent earnings, though current valuation is slightly stretched. Ideal entry zone: ₹2,700–₹2,750. If already held, consider a 3–5 year horizon with exit near ₹3,200–₹3,300 or if ROE/ROCE begin to decline.

🔷 Positive

• 📊 ROCE of 33.7% and ROE of 25.2%: Indicates strong capital efficiency and profitability.
• 📈 EPS of ₹75.6: Reflects robust earnings performance.
• 📈 MACD positive (10.1) and RSI (46.8): Suggests neutral-to-bullish technical momentum.
• 📈 Trading above DMA 200: Indicates long-term trend support.
• 💰 Dividend yield of 2.04%: Attractive for income-focused investors.

⚠️ Limitation

• 📉 High P/E (36.9) vs Industry PE (29.6): Indicates premium valuation.
• 📉 PEG ratio of 5.04: Suggests expensive valuation relative to growth.
• 📉 FII holding declined (−0.47%): May reflect cautious foreign sentiment.
• 📉 Quarterly profit variation (5.63%): Indicates modest earnings growth.

🚫 Company Negative News

• 📉 Share price declined 4.6% post Q2 FY26 results despite strong earnings, indicating cautious investor sentiment

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• 📉 Net margins remained flat YoY at 12%, raising concerns about scalability

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✅ Company Positive News

• 📈 Q2 FY26 net profit rose 10.8% YoY to ₹469 Cr., with revenue up 11.4% YoY

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• 📈 New TCV wins of $528 million in Q2, with 87% in new-gen services

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• 📈 First half FY26 TCV surpassed entire FY25, signaling strong deal momentum

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🏭 Industry

• 💻 Operates in IT services and digital transformation, benefiting from global tech adoption and AI-led modernization.
• 📉 Industry PE of 29.6 suggests Mphasis trades at a premium, requiring sustained growth to justify valuation.

🧾 Conclusion

• 📌 Ideal entry zone: ₹2,700–₹2,750 based on DMA and valuation support.
• ⏳ Holding period: 3–5 years to benefit from AI-led services and strong deal pipeline.
• 🚪 Exit strategy: Consider exit near ₹3,200–₹3,300 or if ROE/ROCE decline or margin pressure persists.

Sources

Fortune India

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