Rs 172 to Rs 2,871: This IT stock turned into a multibagger in 1.5 years

Stock of Mastek Ltd has zoomed over 1,500% in over 1.5 years. The stock, which closed at Rs 172.35 on March 27, 2020 rose to a high of Rs 2,871 today, surging 1,565% on the Bombay Stock Exchange (BSE). An amount of Rs 1 lakh invested in the shares of Mastek on March 27 last year would have turned into Rs 16.65 lakh today.

In comparison, Sensex has risen 102.43 per cent during the period.

The mid cap stock hit an intra day high of Rs 2,871 on BSE today. The stock has gained after 3 days of consecutive fall. Mastek share is trading higher than 100 day and 200 day moving averages but lower than 5 day, 20 day and 50 day moving averages.

Total 5,065 shares of the firm changed hands amounting to a turnover of Rs 1.47 crore on BSE.

Market cap of the IT firm rose to Rs 8,375 crore on BSE.

The IT share has gained 148.04% per cent since the beginning of this year and climbed 217.43  per cent in one year. The stock has lost 8.65 per cent in a month.

The stock hit 52-week high of Rs 3,666 on October 19, 2021. However, it slipped 15% in the next session after the firm reported a flat set of earnings in Q2. It fell after three sessions of gains after the company's management said attrition was a main concern for the firm.

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The software company reported a 4% QoQ rise in the consolidated profit at Rs 72.29 crore for the quarter ended September 30, 2021 against Rs 69.30 crore for the quarter ended June 30, 2021. Sales rose 3.38% to Rs 533.93 crore in Q2 against Rs 516.47 crore sales in Q1 of the current fiscal.

HDFC Securities came out with its bullish outlook for the stock despite soft second quarter earnings of the company.

The brokerage said Mastek share price was likely to climb up to Rs 3,300 per share from the current market price. The bullish outlook was based on an expected recovery in the UK government business and ongoing turnaround in the US business.

HDFC Securities said, "We maintain a buy on Mastek, despite a soft Q2 (though in line with estimate) and expect the growth trajectory for Mastek to revive, based on (1) a strong footing in the UK government business; (2) cloud migration/transformation agenda, which is driving growth; (3) expected recovery in the NHS, based on deal wins; and (4) healthy recovery in the US geography and UK private segment."

"Mastek closed a large deal in Europe, which is expected to ramp up from Q4, providing revenue visibility. The next phase of growth will be driven by US geography; the company is looking for an M&A for a head start. The EBIT margin was maintained but there will be headwinds due to planned investments, higher attrition, and an increase in freshers' hiring," HDFC Securities added.

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Promoters held 37.65 per cent stake in the firm and public shareholders owned 62.25 per cent at the end of September quarter. 89,164 public shareholders owned 1.84 crore shares of the firm.

Of these, 84,247 shareholders held 20.63% stake with capital up to Rs 2 lakh. Only 28 shareholders with 23.59% stake held capital above Rs 2 lakh at the end of September quarter. 56 foreign portfolio investors (FPIs) held 4.16% stake or 12.33 lakh shares in Q2 of the current fiscal.

The share of the firm has outperformed its peers since March 27 last year. While Tata  Consultancy Services (TCS) share has risen 94 per cent, stock of another competitor Infosys has gained 172% during the period.

Share of Wipro has managed to climb 259 per cent since March 27 last year.

The phenomenal rise in the stock of Mastek reflects the financial performance of the firm. In the June quarter, the firm reported a healthy set of earnings.

Profit after tax (PAT) increased 14.4 per cent QoQ to Rs 69.3 crore against Rs 60.55 crore for the quarter ended March. Sales rose 6.83% to Rs 516.47 crore in the June quarter against Rs 483.21 crore in the March quarter of 2021.

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In fact, net profit of the software firm has more than doubled from Rs 33.99 crore from March quarter of 2020 to Rs 72.29 crore in the September quarter of the current fiscal. The feat of the doubling of net profit comes in a year when Indian economy and corporate India were hit hard by the effects of the Covid-19 pandemic.

Sales of the firm has steadily risen from Rs 336.66 crore in the quarter ended March 2020 to sales of Rs 533.93 crore in the last quarter.

On an annual basis, the firm has reported a stellar 92.31% rise in profit for the fiscal ended March 2021 to Rs 209.35 crore against profit of Rs 108.86% crore for the March 2020 fiscal.

Sales zoomed 60% to Rs 1,721.86 crore in last fiscal compared to Rs 1,071.48 crore for March 2020 fiscal.

Incorporated in 1982, Mastek offers enterprise level digital transformation services and software for large public and private enterprises in the UK, US and India.

The company's portfolio includes business and technology services, which consists of IT consulting, application development, systems integration, application management outsourcing, testing, data warehousing and business intelligence, application security, customer relationship management (CRM) services and legacy modernisation.

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