Siddharth Sedani Anand Rathi Shares and Stock Brokers
Mastek is an information technology (IT) solutions provider. The company and its subsidiaries are providers of vertically focused enterprise technology
solutions. The company specializes in developing, maintaining and managing digital solutions for clients in government, health, retail and financial services.
Mastek reported revenue of $36.1m, up 4 percent QoQ (~6.7 percent in Constant Currency dollar terms). It ended Q1 FY19 with a 12-month order book of $75m, up 40 percent YoY. The EBITDA margin came at 12.7 percent, up 60 bps YoY.
The tax rate has moved lower toward 22 percent (tax rates are lower in all three regions: the US, the UK, and India). This and currency movements lead to a further increase in FY19e earnings by 9 percent and FY20e (estimated) by 12 percent.
The TAIS Tech investments are now largely complete; hence, we expect a gradual margin expansion in sync with revenue growth. Majesco stake contributes Rs 90 a share.
We factor into our estimates primarily the favorable exchange rate and tax rate benefits, resulting in higher earnings.
Given the persistently greater growth, we continue to value the business at 15x FY20e EPS of 42.60 and its investment in Majesco US at a 10 percent discount to its market cap ($270m), contributing Rs 90 of our target of Rs 730.
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