Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Initiating Coverage - Mastek Ltd - HDFC Securities Retail Research Desk

Posted On: 2021-02-23 05:56:29 (Time Zone: Arizona, USA)

Our Take:

Mastek Ltd's 12 month order backlog was Rs 946.7 crore ($129.6m) as on 31 st December, 2020 as compared to Rs 940.5 crore (US$ 127.5 mn) in Q2FY21, reflecting a growth of 0.7% in rupee terms. The Company added 57 new clients in Q3FY21. Total client count as of 31st December, 2020 was 618 (LTM) as compared to 542 (LTM) in Q2FY21. Mastek is expecting strong growth from multi-year deals led by integration of Evosys and its capability to offer end to end solution.

On Oct-2020, Mastek's material wholly-owned subsidiary - Mastek (UK) was holding 20,18,192 stocks in Majesco (USA) had tendered its entire stake with the Acquirer of Majesco (USA) for cash, and has received the consideration aggregating to US$ 32.30 mn on October 19, 2020. This decision to sale its stake in Majesco could help Mastek (UK) to drive its growth strategy and reduce the borrowings.

On Feb-2020, Mastek acquired Evosys, the combined business significantly expanded the portfolio of services and market opportunities. Evosys operates in a high growth segment of Enterprise Cloud Applications where Oracle is one of the leading players for cloud applications in HCM (Human Capital Management), ERP (Enterprise Resource Planning), SCM (Supply Chain Management) and BI (Business Intelligence). Evosys is a recognised leader and focused on Oracle Cloud implementation & consultancy with 13 years of experience and 1000+ Oracle Cloud customers across 30+ countries. The cloud services market continues to grow faster than traditional IT segments and Mastek has seen healthy opportunity on digital transformation phase in the industry.

Mastek reported robust margins over the last three quarters and has many levers to improve margins like higher offshoring, SG&A rationalisation and optimisation of employee cost along with sales as well as administration cost. We expect, EBIT margin of ~17-18% in FY22E and FY23E. UK Government & Evosys which is likely to contribute ~70% of Mastek FY22E revenues are expected to deliver higher margins (UK Govnment-18 & Evosys-22%) while the remaining 30% of the is likely to be low margin at ~13-14%.

Valuations & Recommendation:

Mastek has witnessed a sustained improvement in its business profile and geographical presence over the past, supported by increase in scale and diversification of revenues across business segments while generating adequate returns. Mastek has a longstanding relationship with the UK government as it has been working as a subcontractor to large IT companies for execution of UK government's projects over the past. This long-term relationship, experience in Government as well as private project in various geographies and excellent execution capabilities could help to Mastek as a prime beneficiary of UK government's digital spends.

Acquisition of Evosys, has helped the company in diversifying its geographical presence, product and service mix, along with customer diversification. Market share gains on the back of inorganic expansion are expected to drive the company's long term growth. We think the Base case fair value of the stock is Rs 1273 (12.5x FY23E EPS) and the bull case fair value of the stock is Rs 1374 (13.5x FY23E EPS) over the next 2 quarters. Investors can buy the stock on dips to Rs 1118-1122 band (11.0x FY23E EPS) and add more on dips to Rs. 1016-1020 band (10.0xFY23E EPS). At the LTP of Rs 1172, stock trades at 11.5x FY23E EPS.

Shares of MASTEK LTD. was last trading in BSE at Rs.1204 as compared to the previous close of Rs. 1133.6. The total number of shares traded during the day was 16441 in over 2260 trades.

The stock hit an intraday high of Rs. 1205 and intraday low of 1125.15. The net turnover during the day was Rs. 19346279.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Warehousing demand expected to grow around 160% to reach 35 million sq. ft in 2021: JLL

Telecom - Spectrum auction: Prudent investment by Bharti Airtel - ICICI Securities

JB Chemicals & Pharmaceuticals - Analyst meet takeaways - ICICI Securities

IPO Review - MTAR Technologies Ltd - ICICI Direct

Auto Sector - Monthly Volume Round-up - Feb 21 - Decent YoY Growth Continues

Aditya Birla Fashion and Retail - Focus on scaling up new businesses - ICICI Securities

Automobiles (wholesale) - Wholesales push continues despite modest retail trends - ICICI Securities

Aditya Birla Capital - Thoughtful (inclusive) conglomerate business evolution commands premium - ICICI Securities

Jubilant Foodworks - Buying in-the-money options - ICICI Securities

Multi Commodity Exchange of India - Play on rising commodity prices? - ICICI Securities

Gladiator Stocks - Sudarshan Chemical - ICICI Direct

Monthly Commodities Outlook - March 2021 - ICICI Direct

ICICI Direct - Monthly Currency Outlook: Rupee to depreciate further towards 75.00 level...

ICICI Direct - Covid Recovery Pulse - E-way bill generation in February 2021 starts on strong note...

Company Update - Virtual JLR Investor Event - Tata Motors - ICICI Direct

Analyst Meet Update - Aditya Birla Fashion and Retail - ICICI Direct

MTAR Technologies Ltd. - IPO - Huge Opportunities from Clean Energy Bodes Well - Reliance Research

ICICI Direct Derivatives Weekly View (February 26): Failure to move above 14700 may extend declines towards 14300...

Bank: Sector Credit Trends - Slows, Yet again - HDFC Securities

Piramal Enterprises - Pharma day highlights - ICICI Securities

Polymer price tracker - PVC prices rise sharply again! - ICICI Securities

Greenply Industries - Growth returns, at an inflection point - ICICI Securities

Tata Motors - JLR future proofing itself with rapid electric transition - ICICI Securities

Dairy - Higher freight cost and increase in Global SMP prices - ICICI Securities

Analyst Meet Update - Nestlé India (Hold): Focus on product innovation, expanding rural reach - ICICI Direct

MTAR Technologies Ltd - A strong player in booming high precision engineering... - Geojit

Rollover Report for February - March 2021 : Angel Broking

Reaction from industry experts on Q3FY21 GDP numbers

M. Govinda Rao, Chief Economic Adviser, Brickwork ratings on Q3FY21 GDP numbers

Mr. Dhiraj Relli, MD & CEO, HDFC securities views on Q3FY21 GDP Growth Number

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on Q3FY21 GDP

Rollover Analysis - Feb 21, 2021 - YES Securities

Consumer Durables - Demand-driven recovery continues - HDFC Securities

Cement - Demand surprises; earnings upgrade to continue - ICICI Securities

Gladiator Stocks - TeamLease Services - ICICI Direct

Gladiator Stocks - Metals to outshine post multi-year breakout... - ICICI Direct

Company Update - Sundaram Finance - ICICI Direct

Indian pharmaceutical industry to meet an ambition of US$130 billion by 2030 through innovation-led growth: EY-FICCI report

4th Industrial Conclave - Bullish undertone, favourable valuation - HDFC Securities

Sanofi India - Weak quarter; sequential improvement - ICICI Securities

Sunteck Realty - All eyes on upcoming launches - ICICI Securities

Company Update - Tata Motors - ICICI Direct

Q4CY20 Company Update - Mahindra CIE Automotive - ICICI Direct

Event Update - Hindalco - ICICI Direct

EY report launch at BioAsia 2021 - Moving the needle: Healthcare industry in a post-COVID world

Initiating Coverage - Dalmia Bharat Ltd - HDFC Securities Retail Research Desk

Hindalco Industries - Status quo maintained - ICICI Securities

Tata Motors - India business scaling in the right direction - ICICI Securities

IPO Review - Heranba Industries Ltd

Company Update - Narayana Hrudayalaya - ICICI Direct

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020