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Mastek Ltd - Q1FY21 Company Update - ICICI Securities

Posted On: 2020-08-01 22:10:11

Mastek's revenues increased 12.1% QoQ (in CC terms) and by 9.7% QoQ (in reported terms) to US$50.8 million. The increase in revenues was mainly led by Evosys acquisition (up 47.1% QoQ) partially offset by 3.3% QoQ decline in organic revenues. EBIT margins declined 31 bps QoQ to 14.7% mainly led by higher depreciation cost. Adjusted PAT fell 21.6% QoQ to Rs. 40.4 crore. The order book fell 2.4% QoQ (up 16% YoY) to US$101 million (Rs. 764.5 crore). The key positive in the quarter was the company has reduced debt US$6 million (~Rs. 45 crore) and DSO days by nine days QoQ to 72 days. Mastek will receive US$26.4 million (~Rs. 200 crore) from Majesco US sale.

Valuation & Outlook

We expect revenues in the UK government to improve from H2FY21E led by a strong deal pipeline. In addition, vendor consolidation in US retail coupled with integrated offering of Evosys & Mastek will help in winning large multi-million annuity type of deals. This will further boost revenues. Further, cost rationalisation and higher margins at Evosys are expected to drive FY21E margins upwards. Hence, we upgrade the stock from HOLD to BUY with a revised target price of Rs. 650/share.

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Shares of MASTEK LTD. was last trading in BSE at Rs.572.5 as compared to the previous close of Rs. 523.2. The total number of shares traded during the day was 74648 in over 4753 trades.

The stock hit an intraday high of Rs. 596.6 and intraday low of 508.7. The net turnover during the day was Rs. 41921383.

Source: Equity Bulls

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