Mastek shares surge 15% post Q4 numbers. What's next for this Sunil Singhania stock?

Shares of Mastek soared more than 15 per cent during the early trading session on Thursday after the IT company reported a strong performance in the March 2023 quarter. The company also announced a stellar dividend along with its quarterly numbers.

Mastek reported a 22 per cent rise in the revenue from operations to Rs 709.18 crore for the quarter ended on March 31, 2023, against s an income of Rs 581.83 crore the same quarter previous year. The company had reported a revenue from operations at Rs 658.66 crore in the December 2022 quarter

Mastek's operating EBITDA grew by 4 per cent YoY to Rs 125.5 crore from Rs 120.7 crore. However, its net profit attributable to owners of the company degrew 9 per cent to Rs 72.57 crore in Q4FY23, from Rs 79.9 crore in the Q4FY22. The company reported a net profit attributable to owners at Rs 64.18 crore in Q3FY23.

Following the announcement of earnings, shares of Mastek surged about 15 per cent to Rs 1821.20 on Thursday, before giving up its gains partially. The stock had settled at Rs 1584.70 after Wednesday's trading session.

Thanks to this stellar rise during Thursday's trading session, the stock turned flat on a year-to-date (YTD) basis. However, the stock is still down 35 per cent in the last one year, while it is still 40 per cent below its 52-week high at Rs 2,59.30 on 22 April 2022.

For the financial year ended on March 31, 2023, Mastek reported a minor drop in the net profit to Rs 293.01 crore from Rs 295.13 crore in the previous fiscal. However, its revenue from operations rose over 17 per cent to Rs 2,563.39 crore from Rs 2,183.84 crore.

The company said healthy growth during the quarter was fueled by strong in-quarter execution and demand for Digital Engineering, Experience, and Cloud Transformation services. Despite macro uncertainty, the company’s pipeline and order backlog across markets continues to grow, account mining is yielding results, the management said.

Mastek said it added 28 new clients in Q4FY23 and the total active clients during Q4FY23 was 464 as compared to 444 in Q3FY23. Mastek reported that as of March 31, 2023, its 12-month order backlog was Rs 1,794.1 crore ($218.3 mn), up from ₹1,705.8 crore ($206.2 mn) in Q3FY23.

Superstar fund manager Sunil Singhania, through two schemes of Abakkus, cumulatively owned 9,86,689 equity shares, 3.23 per cent stake in Mastek as of March 31, 2023. Even the brokerage firms are slightly positive on the stock after Q4 performance.

The UK geography will continue to drive growth, supported by a revival in tech spend across UK central departments, new deal wins from the Home Office, revival in NHS and investments in UK private sector. The company has implemented leadership changes in the US to revive growth, said HDFC Securities.

The EBITDA margin expanded in the quarter and will be in the range of 18-19 per cent in the medium term, supported by operating levers like utilization improvement and reduction in sub-con. We increase our EPS estimates by 3 per cent, based on better growth and margins, it said with an 'add' rating and a target price of Rs 1,930.

Mastek reported strong constant currency revenue growth of 5.3 per cent sequentially, beating our estimates led by strong in-quarter execution and demand for digital engineering, experience, and cloud transformation services, said brokerage firm Sharekhan, which has maintained its hold rating on the stock. Its target price of Rs 1,740 has been met.

"The management mentioned that they have not seen any ramp down of new projects but admitted that they are seeing longer decision cycles. The management believes this trend is likely to stay for at least 2-3 quarters. We believe the outlook for FY24 looks uncertain in the near term given the incrementally deteriorating macro environment," it said.

Along with the earnings, Mastek's board recommended a final dividend of 240 per cent, which is Rs 12 per equity share with a face value of Rs 5 each.  The total dividend for the financial year ended March 31, 2023, including an interim dividend of Rs 7 per share, stands at Rs 19 per share or 380 per cent.

 

 

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