Software company Mastek had a slow Q3 with only 2.2% (3.7% in CC terms) and 22% year-over-year (YoY) revenue on a sequential basis, but deal flow in UK healthcare and broadly Improvement was seen. According to brokerage house Anand Rathi, the order backlog, which was up 32% YoY.
On a positive note, the US maintained growth, reflecting Mastek’s success in the private sector under its new management. It is looking to further enhance this growth in the US through M&A. The 19.1% EBIT margin quarter-over-quarter (QoQ) was flat. The brokerage has largely retained its FY22e/FY23e. It has maintained its buy rating at multibagger stock and has increased its target value 3,510.
“Mastec is maintaining growth in the US, which will help it diversify from its current concentration risks. The UK public sector is bouncing back and it only needs to fix the UK private sector. In FY22, its Expected to grow at 26% (Leader Quadrant) and 19% CAGR (Compound Annual Growth Rate) in FY22-24. At current price, the stock is attractively priced,” the note said.
After absorbing wage reforms, Mastec expects margins to be 20-21% and deliver Q3 at 21.1%. Attrition increased to 28% on a quarterly yearly basis, suggesting even higher attrition.
“Hence, the salary pressure is likely to remain high this year as well. Offsetting tailwind includes utilization at 70% and fresher intakes. Offshore remains stable. Mastek intends to undertake massive fresh hiring to support its growth ambitions in FY 2013,” said Anand Rathi.
Mastek shares have given multibagger returns with gains of over 135 per cent in a span of one year. However, the IT stock has declined around 13% so far in 2022 (year-to-date or YTD).
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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