Partner With Us NRI
Mastek Ltd>
  • CMP : 1,995.1 Chg : -15.55 (-0.77%)
  • Target : 3,100.0 (9.54%)
  • Target Period : 12-18 Month

22 Apr 2022

Aspiring to reach US$1 bn revenue in second half of decade

About The Stock
  • Mastek Ltd (Mastek) offers data, apps, cloud services to public & private enterprises in the UK, US, Middle East, Asia Pacific and India
  • The company’s recent acquisition of Evosys has enabled Mastek to provide end-to-end solutions and improve margins from ~14% to 21%
  • Net debt free and healthy double digit return ratio (with RoCE of 20%)

We attended the Analyst Day of Mastek with key takeaway being:

  • Mastek aspires to reach US$1 bn revenue in five to six years from now. The revenue number includes five to six acquisitions in that period
  • The company is looking to aggressively expand in US market (17.6% revenue mix in FY22). As a result, it expects this pie to reach 33.8% by FY25
  • Mastek aligned leadership for US market growth wherein it has appointed Umang Nahata, CEO of Evosys, as president, North America business
  • The company has 10-15% wallet share in the UK public market and has significant growth headroom
What should Investors do?

Mastek's share price has grown by ~12x over the past five years (from ~₹ 238 in April 2017 to ~₹ 2,830 levels in April 2022).

  • We change our rating from BUY to HOLD
Target Price Valuation

We value the stock at 22x FY24EPS with a target price of ₹ 3100

Key Triggers for future price performance
  • Growth in new logo acquisition, increasing deal size, expansion of sales & marketing and market share gains in the UK market to drive revenues
  • Management change in the US market may help it to grow stronger and achieve the desired revenue mix
Alternate Stock Ideas

Apart from Mastek, in our coverage we like Infosys

  • Key beneficiary of improved digital demand, industry leading revenue growth and healthy capital allocation prompt us to be positive. HOLD with a target price of ₹ 1,775

Key Financial Summary

Particulars FY19 FY20 FY21 FY22 5 Year CAGR(FY17-FY22) FY23E FY24E 2 Year CAGR (FY22-FY24E)
Net Sales 1,033.2 1,071.5 1,721.9 2,183.8 31.3 2,575.2 3,025.9 17.7
EBITDA 131.5 155.4 364.5 462.5 57.0 522.8 614.3 15.2
EBITDA Margins (%) 12.7 14.5 21.2 21.2 - 20.3 20.3 -
Net Profit 100.9 133.0 209.4 295.1 55.5 332.9 402.1 16.7
EPS (|) 40.1 52.4 81.9 103.8 - 117.1 141.4 -
P/E 70.6 54.0 34.6 27.3 - 24.2 20.0 -
RoNW (%) 14.1 16.8 24.4 27.5 - 24.8 24.0 -
RoCE (%) 17.0 11.3 21.5 26.7 - 25.4 25.1 -
Source: Company, ICICI Direct Research

Key Highlights and meet takeaways

UK & Europe Business

  • As per the company, the UK public sector software & IT services market is pegged at £13.6 billion (bn). The market is growing at 2% per annum
  • Digital demand in the market is growing at 13% YoY. Mastek is servicing four of the five major spenders in the market. Mastek is strongest in terms of SAAS offering
  • The market presents an annuity business (run & maintain) opportunity for Mastek, which is evidenced from large deal (>£10 mn) acceleration. The company has won seven large deals in FY22 vs. three in FY21
  • Mastek has a wallet share of 10-15% and has significant growth room. As per the company, 50% of Oracle business in the UK is in public sector
  • The company is also looking to scale up UK private business as well as they are looking to expand into Nordic countries, Netherlands, France, etc
  • Private sector opportunity includes fraud analytics in BFSI (£218 mn fraud happens every year in UK, identity management (3,000 defence persons in UK uses Mastek’s identity management system, vehicle leasing platform (especially on the EV side), managed services (annuity revenues)

North America business

  • The company has re-aligned leadership in the America region. Umang Nahata , who is CEO of Evosys, has been given charge of Americas business and he has been appointed as President, Americas for Mastek. Raman Sapra, who was earlier President, Americas has been given responsibility of Global service line and M &A
  • After this leadership change, Mastek will operate as one entity in the region
  • Earlier they had three capabilities in the region viz. Oracle cloud applications, digital commerce and Oracle SAAS enhancement services
  • Now they will be operating under five capabilities viz. A) Glid 4.0. They are focusing on cloud transformation and legacy modernisation. Deal sizes are also increasing from US$0.5 mn earlier to US$1 mn now. Peers include Oracle focused players and Global system integrators (GSI) B) Full stack CX- they are focusing on digital commerce and customer analytics/experience (in CX, they do not have sizable presence and they are looking to scale up the business). As per the company, 25% of the Oracle business comes from customer experience (CX). C) cloud enhancement (CES): Focus is on managed services since the products as well as platforms needs constant upgrading D) Vertical cloud capabilities: the focus is on offering more capabilities E) Data & automation: The focus area is to acquire data assets, which are into the domain of digital commerce, CX, ERP & data analytics
  • The company is looking for strategic account mining of top 30 accounts where the is a potential opportunity of US$1.5 bn. Verticals where they are focusing are healthcare & lifesciences, manufacturing & industrial, retail & consumer, etc
  • They will also look at new alliances here with Microsoft, Salesforce, UIpath, Pega & other for cloud & allied services


Other Key highlights


  • It is also looking to diversify its geographical concentration. Mastek is looking to scale up the US business under new leadership so that US region would contribute 33.8% of the revenue mix in FY25 vs. 17.6% in FY22. As a result, contribution from the UK business (which currently forms 64.2% of the revenue mix) would come down to 46.5% in FY22 and that of AMEA would come down from 14.4% to 9.7%
  • The company is looking to reach US$1 bn revenue in the second half of the decade. The aspiration revenue numbers include acquisitions (they are looking at five to six acquisitions in the next five to six years i.e. one acquisition every year. The company is looking to acquire companies having annual sales in the range of US$20-40 mn. Mastek is looking to fund these acquisitions through a combination of internal accruals, fund raising as well borrowings
  • The 12 month’s order back-log (new deals) grew 15.5% QoQ and is at US$193.8 mn
  • The company has | 794 crore cash on books
  • Client portfolio is quite diverse now as top five, top 10 client’s revenue mix is now at 30%, 43% vs. 40%, 58%, respectively, in FY20. Utilisation has improved 340 bps in the last two years to 80% now

Terms & conditions and other disclosures


I/We, Sameer Pardikar, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products.

ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com. 

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. 

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stocks price movement, outstanding positions, trading volume etc as opposed to focusing on a companys fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports. 

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. 

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research. 

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. 

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. 

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. 

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. 

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. 

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report. 

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. 

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. 


ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts valuation for a stock

Buy: >15%

Hold: -5%to 15%;

Reduce: -15% to -5%;

Sell: <-15% 

Pankaj Pandey

Head – Research




ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093




Read More