CMP: ₹370.75
Target: ₹510
Partially consolidated in Q4, Evosys was resilient in the macro environment. It brought $12 million (annualised $80m+) in Q4, reflecting the seasonal pick up and ended FY20 with about 12 per cent growth. The Evosys management tone was positive, expecting 18-20 per cent growth in FY21. Ranked the fourth fastest-growing Indian company in the UK, it is climbing up ranks in Garner’s magic quadrant for Oracle cloud services as well. Margins have fallen to 18-20 per cent (from 22 per cent in FY19), potentially on accelerated investments in the present context.
Mastek ended FY20 positive. Its UK business delivered a second straight quarter of 5 per cent+ growth, almost reverting to Q4 FY19 levels; Evosys integration is on track (first joint win £4 million). Mastek had ₹81.6 crore net cash (after the Evosys-payout) though supported by payables, and may see some reversal ahead. Q4 margins were also the highest after the hiving off, and client-concentration ratios (top-10 now at 51 per cent of revenue, in line with mid-caps) came down. The only negatives were US operations and high receivables — both likely to correct in FY21.
Target retained at ₹510.
Risk: Loss of momentum at Evosys.
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