Buy Mastek; target of Rs 2575: Sharekhan

Sharekhan is bullish on Mastek has recommended buy rating on the stock with a target price of Rs 2575 in its research report dated October 23, 2023.

Broker Research

October 25, 2023 / 15:17 IST

Buy

Sharekhan's research report on Mastek

Mastek reported revenues of $92.6 million, up 4.4% q-o-q/13.5% y-o-y in constant currency (cc), in line with our estimates. Biz Analytica’s contribution for the quarter stood at $2.5 million, while organic growth stood at 2.3% in US Dollar terms and 2.7% in rupee terms. EBITDA margins fell sharply to 16.1%, down ~160 bps q-o-q missing our estimates of 16.9% due to wage hike(130-140bps impact) effective August this year and low margin profile of Biz Analytica (30-40 bps). The company is seeing consistent improvement in order booking and the same is reflected in the 12-month order backlog, which has grown by 5.6% q-o-q /22.3% y-o-y in rupee terms. The company added 29 new clients in Q2FY24. We believe the company’s strong UK public sector relationships, robust 12-month order backlog in addition to build-up of joint deals and pipeline aided by Biz Analytica acquisition positions the company to achieve stronger industry leading growth.

Outlook

Hence, we maintain Buy with a revised price target of Rs. 2,575 (increase in PT reflects roll forward to Sep FY25E EPS). At the CMP the stock trades at 19.5/15.4x its FY25/26E EPS.

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