Reduce Mastek, target price Rs 1800: HDFC Securities

HDFC Securities has reduce call on Mastek with a target price of Rs 1800. The current market price of Mastek is Rs 1703.35. Mastek, incorporated in the year 1982, is a Small Cap company (having a market cap of Rs 5130.76 Crore) operating in IT Software sector.

Mastek key Products/Revenue Segments include I T Services for the year ending 31-Mar-2022.

Financials

For the quarter ended 31-12-2022, the company has reported a Consolidated Total Income of Rs 664.69 Crore, up 5.14 % from last quarter Total Income of Rs 632.21 Crore and up 19.19 % from last year same quarter Total Income of Rs 557.65 Crore. Company has reported net profit after tax of Rs 67.12 Crore in latest quarter.

The company’s top management includes Mr.S Sandilya, Mr.Ashank Desai, Ms.Priti Rao, Mr.Atul Kanagat, Mr.Rajeev Grover, Mr.Ketan Mehta. Company has Walker Chandiok & Co. LLP as its auditors. As on 30-09-2022, the company has a total of 3 Crore shares outstanding.

Investment Rationale
Mastek reported a muted quarter; revenue growth of +3.1% QoQ CC was led by the integration of MST and organic growth was flat QoQ.

The order book improved by 5.3% QoQ CC to USD 206mn, indicating a revival in organic growth, provided revenue leakage from NHS and US oracle is over. The brokerage expects EBITDA margin to be in the range of 17-18% in the short to medium term, supportedby operating levers like utilisation improvement. The brokerage slashes its FY24/25E EPS by ~4/2% and maintain its REDUCE rating, considering growth challenges.

Promoter/FII Holdings
Promoters held 37.28 per cent stake in the company as of 30-Sep-2022, while FIIs owned 8.01 per cent, DIIs 3.73 per cent.