HDFC Securities recommended a buy call on Mastek with a target of Rs 505 in its latest research report. Here are the key highlights.
- The stock’s revenue was GBP 28.1mn against est. GBP 28.5mn, in CC terms revenue, was flat QoQ and de-grew 2.3% YoY.
- Brexit uncertainty is impacting growth but robust order backlog(+4.4% QoQ) and completion of UK spending review can revive growth.
- UK private sector is facing client-specific issues and recovery will be slow
- US revenues rose 1,4% QoQ CC. Recent management changes and diversification of service offerings are strategic initiatives which are delivering results.
- EBIT margin was 9.5% -196bps QoQ, margin was impacted by one-time employee separation expense and wage hike.
- Mastek has managed to control costs in a challenging environment, employee expense is flat QoQ despite wage hike.
Thus, the brokerage maintained buy on Mastek despite a slight miss on revenue and margins. Meanwhile, Brexit deal announcement is optimistic but the brokerage do not build any optimism in its estimates and will wait for clarity.
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