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Mphasis: Slowing down - Views on News from Equitymaster
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  • Jul 14, 2001

    Mphasis: Slowing down

    Mphasis BFL for the 1QFY02 has posted a 17% sequential (QoQ) drop in topline and a 16% drop in bottomline. On a YoY basis the company has shown a 7% growth in revenues and 213% growth in net profits. The operating margins too have declined by 250 basis points.

    Despite the significant decline in revenues (sequentially) the company's operating margins have not come down drastically as the software development expenses and administrative expenses have declined compared to 4QFY01 by 10% and 37% respectively.

    (Rs m) 4QFY01 1QFY02 Change 4QFY01# 1QFY02# Change
    Sales 511 422 -17.4% 841 716 -14.8%
    Other Income 5 9 78.9% 3 12 300.0%
    Expenditure 378 324 -14.5% 754 650 -13.8%
    Operating Profit (EBDIT) 133 99 -25.6% 87 66 -24.0%
    Operating Profit Margin (%) 25.9% 23.4% - 10.3% 9.2% 44.16
    Interest 1 1 -13.5% 3 3 -
    Depreciation 32 31 -2.6% 50 47 -6.0%
    Profit before Tax 104 75 -27.7% 37 28 -24.0%
    Tax 16 1 -91.4% 16 2 -87.5%
    Profit after Tax/(Loss) 88 74 -16.1% 21 26 25.2%
    Net profit margin (%) 17.3% 17.6% - 2.5% 3.6% 47.0%
    Amortisation of goodwill - -   342 347 1.5%
    Net profit 88 74 -16.1% (321) (321) -
    Diluted number of shares 15.8 15.8 - 15.9 15.9 -
    Diluted Earnings per share* 22.4 18.8 -16% 5.2 6.5 -
    P/E - 11.2 - - 32.2 -
    *(annualised) - - - - - -
    1. 1 US$ = Rs 46.5
    2. Expenditure includes amortisation of stock compensation expenses
    # Consolidated numbers based on US GAAP

    Earlier, the company had indicated that it would not be able to meet its guidance for FY02, which was in the range of US$ 100 m (consolidated numbers). At its board meeting on June 15, 2001 Mphasis indicated that its topline growth would be in line with the industry leaders. According to the consolidated results as per US GAAP the revenues have declined by 15% compared to 4QFY01. However, on a YoY basis the topline has grown by 8%. As per the US GAAP the company posted losses due to amortisation of goodwill. Excluding the same, the company posted profits of US$ 0.7 m (Rs 25 m). This translates to a 29% growth sequentially. However, Mphasis had a relatively significant other income component, excluding which the profits would have dipped. The Indian operations of the company for which the figures are given, contributes to 58% of the consolidated revenues in 1QFY02.

    At a current market price of Rs 201, the stock is trading at a P/E multiple of 11 times its FY01 annualised earnings.



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