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Mastek reported a strong quarter with revenue and margin both coming in line. The order book improved 25.4% YoY, boosted by a $65 mn+ win from the UK government (home office), following a $60 mn NHS deal in Q3FY22. The management is aiming to reach $1 billion revenue in the next five years, implying an organic revenue CAGR of >20%. 

The IT stock is trading at a discount of around 34% to the mid-tier IT average. The brokerage has maintained its Buy rating on the Mastek shares with a target price of 3,530. The multibagger stock has rallied more than 103% in a year's period, whereas the IT stock is down about 7% in 2022 (year-to-date or YTD) so far.

“Mastek expects to achieve this growth, based on continued traction in the UK government business (around 10% wallet share); cloud migration/transformation agenda, which will drive Evosys growth; recovery in UK private; and turnaround in the US geography with focus on healthcare and life sciences vertical," the note stated.

The US geography will be a key focus area and investments will be made to strengthen the partner ecosystem. M&A will be a key pillar in US revival, with companies in the range of $30-40 mn as targets. The target EBITDA margin range is 19-20%; there could be near-term headwinds related to ongoing supply side concerns, HDFC Securities' note added. 

Mastek's FY22 revenue grew 26% from the year-ago period to 2,183 crore whereas Q4 revenue increased by 20% to 581 crore, while its net profit came at 88 crore during the January-March 2022 quarter.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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