X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
MPS Ltd: Cross currency movements hurt - Views on News from Equitymaster
The India Letter
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

MPS Ltd: Cross currency movements hurt
Jun 13, 2015

MPS Ltd has announced the fourth quarter results of financial year 2014-2015 (4QFY15). The company has reported around 5.4% YoY growth in sales, while net profits have declined by 3% YoY during the quarter.

Performance summary
  • Sales increase by 5.4% YoY during 4QFY15. In dollar terms, sales were up by 5% on a YoY basis in 4QFY15. North America contributed about 54%, while UK/Europe contributed 44% to the overall revenues. In all 126 clients were billed in the quarter. Contribution from top 5 clients stood at 66% at the end of 4QFY15.
  • Operating profits increase 9.3% YoY during the quarter.
  • Net profits fell by 3% YoY due to sharp fall in other income (-65.2% YoY).
  • Pursuant to the QIP, the number of equity shares increased by 1.79 m. The money raised from QIP (about Rs 1.5 bn) will be used to fund inorganic growth, strategic initiatives, general & corporate purpose etc.
  • The company has zero debt and cash equivalents of Rs 1.75 bn inclusive of the money raised via QIP which is parked in liquid investments temporarily.

Consolidated performance snapshot
(Rs m) 4QFY14  4QFY15  Change FY14  FY15  Change
Income from operations  521 549 5.4% 1,973 2,239 13.5%
Expenditure  342 353 3.3% 1,343 1,372 2.1%
Operating profit (EBDITA) 180 197 9.3% 630 867 37.7%
Operating profit margin (%) 34.5% 35.8%   31.9% 38.7%  
Other income 18  6 -65.2% 67  44 -33.6%
Interest  0  2 2300.0%  4  3 -23.7%
Depreciation 13 12 -12.1% 53  55 3.0%
Profit before tax 184 189 2.4% 640 854 33.5%
Exceptional items  0 0 NA 0 77.2 NA
Tax 54 62 15.4% 218 317 45.2%
Profit after tax/(loss) 131 127 -3.0% 421 614 45.8%
Net profit margin (%) 25.0% 23.0%   21.4% 27.4%  
No. of shares (m)          18.6  
Basic & diluted earnings per share (Rs) $          36.4  
P/E ratio (x) *          22.6  
* On trailing 12 month basis
$ As reported by the company

What has driven performance in 4QFY15?
  • Topline increased by 5.4% YoY in 4QFY15. The top 5 clients contributed about 65% to the revenues in FY15 as compared to 60% in FY14 indicating that the client mining strategy is bearing fruit. In terms of currency contribution, 66% of the business was in USD, 29% in GBP and 4% in Euro at the end of the year. Revenue growth was a bit subdued due to negative cross currency movements during the quarter.

  • Operating profits increased 9.3% YoY during the quarter as margins improved by 1.3% to 35.8%. Total employee count stood at 2,900 at the end of the quarter. The low cost Dehradun facility has about 1,016 employees at the moment.

  • The net profits fell 3% YoY on the back of a fall in other income (-65.2% YoY) and increase in interest expenses.
What to expect?

At the current price of Rs 813, the stock is trading at a multiple of 17.6x our estimated FY17 earnings. The growth in the current quarter was subdued due to cross currency effects. However, vendor consolidation and the ability to provide an end to end service makes MPS preferred choice for its clients.

Further, the company has raised Rs 1.5 bn through QIP and is on look out for acquisitions to grow inorganically. The 2-3 acquisitions (TSI, Element etc) that the company has made in the past have blended well and turned value accretive indicating management's capability to identify growth targets and inter-mingle them well with the existing business. Plus, it is a high margin, high ROE business. However, current valuations are slightly on the expensive side. As a result, we maintain our view of buying the stock at Rs 650 or lower.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MPS LTD SHARE PRICE


Dec 12, 2017 09:39 AM

TRACK MPS LTD

  • Track your investment in MPS LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

COMPARE MPS LTD WITH

MARKET STATS