Buy Mastek, target price Rs 3400: Anand Rathi

Anand Rathi has buy call on Mastek with a target price of Rs 3400. The current market price of Mastek Ltd. is Rs 2949.5. Time period given by analyst is one year when Mastek Ltd. price can reach defined target.

Mastek Ltd., incorporated in the year 1982, is a Small Cap company (having a market cap of Rs 8847.96 Crore) operating in IT Software sector.

Mastek Ltd. key Products/Revenue Segments include I T Services for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 599.46 Crore, up 7.50 % from last quarter Total Income of Rs 557.65 Crore and up 23.23 % from last year same quarter Total Income of Rs 486.45 Crore. Company reported net profit after tax of Rs 88.23 Crore in latest quarter.

Investment Rationale
Mastek bounced back in Q4 with 4.9% sequential growth and a $194m order backlog, up 25% y/y. Management spoke about sustaining high growth till FY25 while reducing exposure to the UK and government businesses. It will achieve this by scaling up its Enterprise business in the US (new leadership) and Europe, and by acquiring some targets (revenue ~$35m) in the US (in FY23). FY23 fresher hiring targets are up 50% (to 1,000) to support growth. EBITDA margins to be maintained above 20% in FY23. The brokerage largely retains FY23e/FY24e, but tweak target to Rs.3,400 (23x FY24e, a 35% discount to LTI). It retains a Buy recommendation.

Promoter/FII Holdings
Promoters held 37.3 per cent stake in the company as of 31-Mar-2022, while FIIs owned 6.62 per cent, DIIs 6.65 per cent.