Dear All,
Forwarding you the Result Flash on Mphasis for 2QFY2011.
Mphasis reported its 2QFY2011 numbers which underperformed street as well as our expectations. The dollar revenues came in at US$281.5mn, up 3.9% qoq. In rupee terms, revenues grew by merely 1.9% qoq to `1,257cr (vs. our expectation of `1,285cr) due to 1.5% decline in revenues of application services business (major contributor to revenues) to `765.5cr. However, in dollar terms revenues of this business increased by 0.5% qoq. Revenues of ITO and BPO business grew by 10.2% and 7.8% qoq to `317.6cr and `163.0cr. BPO business has one-time revenues of `10.2cr, so on a like to like basis, BPO revenues grew by 6.6% qoq.
Gross margins of the company declined by 200bp qoq to 26.9% due to decline in gross profit of ITO business by 14.0% qoq because of certain one-time costs of `11.0cr in this quarter. Also, there is a provision reversal of `32.3cr in cost of revenues of Mphasis. In last quarter, the reversal was of `25.8cr. Provision reversal also happened in SG&A expenses to the tune of `21.9cr (in previeous quarter it was `17.6cr). In BPO business also, there was a onetime cost of `8cr. So, on a like to like basis(i.e. excluding all reversals and one-time), EBITDA margins came in at 15.6% as against 17.3% in 1QFY2011, down 170 bp qoq.
PAT came in at `217.3cr, down 4.1% qoq, aided by higher other income (incl. forex gain, other income and interest income) of `49.7cr as against `34.7cr in 1QFY2011.
2QFY2011: Result highlights
| (` cr) | 2QFY2011 | 2QFY2011E | % var | 1QFY2011 | % chg (qoq) | 2QFY2010 | % chg (yoy) |
| Net revenues* | 1247 | 1285 | (3.0) | 1233 | 1.1 | 1220 | 2.2 |
| EBITDA^ | 195 | 260 | (24.8) | 214 | (8.8) | 315 | (38.0) |
| EBITDA margin (%) ^ | 15.7 | 20.2 | (455)bp | 17.4 | (170)bp | 25.8 | (1014)bp |
| Reported EBITDA | 241 | 257 | (6.5) | ||||
| EBITDA margin (%) | 19.1 | 20.9 | |||||
| PAT | 217.3 | 224 | (3.0) | 226.7 | (101.3) | 267.3 | (137.9) |
Key Highlights:
· Added 680 net employees, taking its total employee base to 41,739. In application services business, headcount declined by 112 employees, taking its total employee base to 15,220. In ITO and BPO services headcount increased by 18 and 738, taking their total employee base to 8,622 and 16,339, respectively.
· Utilization rates onsite as well as offshore, increased for application services and ITO business. However, utlilization rate of BPO declined due to higher net employee adds.
| Utilization (%) | 2QFY2011 | 1QFY2011 |
| Onsite | | |
| Application services | 89 | 87 |
| ITO services | 78 | 77 |
| Offshore | | |
| Application services | 73 | 69 |
| ITO services | 73 | 68 |
| BPO services | 68 | 69 |
· Mphasis recorded better price points offshore for application as well as ITO business qoq at 20US$/hr from 19US$/hr in 1QFY2011. Onsite billing rates stood flat qoq.
· Revenues from direct channel witnessed a sequential growth of 10.7% in dollar terms. The strong revenue growth was driven by higher volumes from existing customers and revenues from customers in emerging markets. However, revenues from HP channel declined by 0.4% qoq.
· 30 new clients were added in this quarter; 17 in direct channel and 13 in HP channel.
· Cash and Cash equivalent stood at `1,864cr
The results were disappointing and the company is trying to manage its cost structure by one-time reversals of provision. We may tweak down our estimates as momentum of weak results continues. The stock is currently under review and we will be releasing a detailed result update shortly.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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