Mphasis
UBS said it likes Mphasis largely due to its potential recovery in revenue growth in the near term, which is not entirely priced-in.
The brokerage said that headwinds from a large customer DXC, its subsidiary Digital Risk, and vertical specific issues, have largely eased.UBS expects Mphasis’ revenue to grow at a Compounded Annual Growth Rate (CAGR) of 10% over financial year 2025-2028, compared to a 2% CAGR from financial year 2022-2025.
The current valuations, although at a premium to its three-year average, price in a 7-8% revenue CAGR over FY25-30 compared to estimates of 11% for that period.
Out of the 39 analysts that have coverage on the stock, 25 have a “buy” rating, eight have a “hold” rating and six have a “sell” rating.
Persistent Systems
UBS said it likes Persistent Systems as:
- Strong execution capabilities, which made it the fastest growing IT services company over financial year 2020 – 2025
- It has reported the highest market share gains over the past five years, as per Gartner.
- It has resilient margins, which are up around 600 basis points over the same period. Most peers have margins that have either remained range-bound or have declined from the base quarter.
- It has a focused exposure to product engineering and low exposure to legacy services.
- It has the strongest positioning, compared to mid-tier and large-cap peers, for the upcoming GenAI cycle.
UBS said the company’s current valuation (around 44x 1 year forward price-to earnings) price in flattish margins and a 14-15% revenue CAGR, which, according to UBS, appears pessimistic.Of the 43 analysts that have coverage on the stock, 21 have a “buy” rating, eight have a “hold” rating and 14 have a “sell” rating.
Shares of Mphasis and Persistent Systems ended the previous session 0.8% and 0.2% lower, respectively.
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