Buy Mastek; target of Rs 510: Anand Rathi

Anand Rathi 's research report on Mastek

Even as its US/retail slid 19% q/q despite a steady market till Feb (lockdown from 21st Mar), Mastek’s $45.9m Q4 revenue (incl. ~1.6 months of Evosys’: $12m) was up 34% q/q, 21% y/y (organic: down 0.7% q/q [flattish in CC], 10% y/y). UK (up 6.9% q/q) made up for the US while Evosys, integrated partially for the quarter, sustained the pace. The EBIT 15% margin was up 359bps q/q but the company spoke of only 12-13% on hiring amid travel restrictions. Not much change in est. EBIT as higher margins offset lower revenue. Target unchanged at `510 (10x FY22e).

Outlook

Target retained at `510. With only a small change to our EBIT estimates and the US continuing to soften the organic performance, we maintain our target, valuing Mastek at 10x FY22 EPS (from 11x earlier). Mastek is likely to be in the -/+ 5% range in FY21; hence, expectations ride on Evosys.

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