Hold on Mphasis

 Weak numbers for 4QFY11 (August – September). Revenue growth at 1.6%qoq was lower
than market expectation of 2.4% qoq due to poor volume sales and lower realized USD/INR rate.
 EBIT margin at 14.7% missed street estimates by 200 bps.
 However, EPS has beaten market expectations because of forex gains.
 Growth continues to suffer from sluggish HP channel sales, which declined 4.4% qoq. This segment provides 62% of total sales.
 Headcount also declined despite the addition of about 2000 Wyde employees. Lower headcount is an indication of worsening demand.
 At the current price, the stock does not seem expensive. Moreover, it has net cash of USD 344 million, which may provide support to the stock price.
 Hence, ‘hold’ rating is maintained despite weak quarterly performance.