MASTEK AIMING FOR INDUSTRY LEADING GROWTH IN FY24

News: Mastek reported strong Q4 revenue growth, reporting CC growth of 5.3% QoQ while dollar revenue was up 7.8% QoQ .Geography wise revenue growth was led by UK & Europe region (60.4% of mix) reporting QoQ growth of 10.5% followed by Middle East, which reported QoQ growth of 8.7% while US region (26% of mix) reported tepid growth of 0.5% QoQ. Vertical wise the growth was driven by government (43% of mix) reporting growth of 11.8% while financial services, health & retail reported QoQ growth of 9.4%, 6.1% & 3.6%, respectively. EBITDA margins increased 40 bps QoQ to 17.7% .The company’s 12 month order back log increased by 4.1% QoQ to US$218.3 mn. It added 28 new clients while net employees declined by 65 bringing the total employee count to 5,622. LTM attrition of the company declined 230 bps QoQ to 21% while on a YoY basis it declined 700 bps. The company declared final dividend of Rs 12 per share taking total dividend for FY23 to Rs 19 per share. For FY23, revenues grew 18.5% in CC while in rupee terms it grew  17.4%. The company reported EBITDA of Rs 455.9 crore with EBITDA margin of 17.8% for FY23

Views: The company’s Q4 performance was aided by the UK market, especially from non-NHS side wherein they are witnessing strong deal momentum and execution in the areas of border security, biometrics solutions, etc while currency also helped the performance. The US market was weak due to a delay in deal execution and near term outlook is also not encouraging due to a delay in decision making visible across clients.  The company made some leadership changes in the US region and is hopeful of a recovery in FY24. The company is targeting industry leading growth in FY24 to be aided by broad base growth across markets (excluding UK NHS, where it has a cautious view for FY24). The company is comfortable with ~18% EBITDA margin range currently as it likes to invest in the sales channel, which would restrict the immediate margin improvement but are hopeful of reaching 19-20% in the medium term on cost optimisation levers

Impact: Positive