MPS Ltd

MPS results were fairly good.
Revenues up 13%
PAT before exceptional items up 24% to 17.5Cr
Trailing EPS is now 34.8, so at current price of 835, it trades at 24x trailing EPS.
EBITDA margins have come down to 35.1 from 38.7%
Top 5 client contribution has gone up to 70% and top 10 are 88%.
Cash on books is now 185cr.

I attended the concall. Here are my notes

EBITDA margins are down because of the acquired businesses.

Someone pressed the management about the reasons for poor growth inspite of the big opportunity size. Management said that the momentum is slow but numbers will eventually come in. They said that the clients generally test the vendors and then slowly increase outsourcing. Even an existing client, when outsourcing a new kind of work/project, starts small and then scales up.

Management said that they are growing at par with the industry. They said they have USD35mn revenues and the biggest player is USD100mn. (I am beginning to think that they are facing challenges in growing. The response was not convincing enough for me. They should be growing faster than the industry)

Rahul and Nishit reiterated that they wanted to double in size through a mix of organic and inorganic growth. But I felt they were not sure when this will happen. They said that it may take 2-3-4 years or a bit more.

Reply regarding acquisition was on the same old lines. They dont want to overpay. Someone asked that when company raised capital, it was assumed that they were already in advanced stages..but then nothing has happened for 6 months. Nishit Arora said they will not overpay 20% just because the money is there, and asked investors to be patient.