Buy Mastek; target of Rs 780: Anand Rathi

Anand Rathi 's research report on Mastek

Mastek had a strong Q1: $50.8m revenue(up 9.7%q/q, 12.1% q/q CC) $33.2m organic revenue, down 3.3%q/q. Its scale will incrementally make performance resilient. The EBIT margin was 14.7% (down 31bps q/q, up 371bps y/y), to be managed in a narrow band. The backlog was $101m, to improve as the UK opens up. Given the recent acquisition, we expect prudence in capital allocation. And if it builds sales capability of Evosys company-wide, its multiple is likely to expand.

Outlook

We raise our FY21e/22e EBITDA 23/25% and assign a higher, 12x, multiple (earlier 10x) with a target of `780 (up from `510).

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