Anand Rathi Share and Stock Brokers Ltd has cut Mastek Ltd stock target price to Rs 3,320 from Rs 3,630 following lacklustre Q4 FY24 financial results. However, the brokerage reaffirmed its 'Buy' rating on the stock, anticipating a rebound in revenue in FY25.
The brokerage expects Mastek to overcome the setbacks in its US business during Q1 FY25, and the growth to accelerate from Q2 FY25 onwards. The company's 12-month order backlog was worth Rs 2,168.4 crore as of March 31, 2024, as compared to Rs 1,794.1 crore a year ago, which fueled optimism for a strong recovery in FY25.
Earlier, last week, the IT company's fiscal fourth quarter net profit jumped 22 percent quarter-on-quarter to Rs 92 crore, even as the revenue fell marginally by 0.6 percent to Rs 779.7 crore due to challenges with three US clients.
While Mastek experienced subdued US business growth in FY24, its UK operations showcased strength with a framework deal, which is expected to generate $50-60 million in revenue over four years.
Also Read | Buy Mastek; target of Rs 3150: Sharekhan
Mastek’s EBITDA fell 6.3 percent quarter-on-quarter to Rs 125 crore in Q4 FY24, and margin shrunk to 16 percent from the previous quarter's 17 percent. The company aims to restore the EBITDA margin to 17 percent in the near term, and gradually raise it to 18 percent as revenue rebounds in Q1 FY25.
Although certain segments like government, education, manufacturing, and technology exhibited growth in FY24, others like health and life sciences, and retail faced contraction.
Anand Rathi, in its research report dated April 30, identified the government business slowdown as a growth risk for Mastek.
The government business, excluding healthcare, grew 5 percent sequentially. The company's management spoke of a potential slowdown in this segment due to elections, but given the order backlog, it still expects to deliver strong growth in FY25.
On April 30, shares of Mastek closed 0.4 percent lower at Rs 2,691. The stock has gained 22 percent in the past six months, outperforming Nifty 50 which gained 19 percent during the same period.
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