- 17 Jan 2025
- ICICI Securities
MASTEK: MUTED REVENUES IN A SEASONALLY WEAK QUARTER; MARGINS RESILIENT AMID WAGE HIKE IMPACT
News: Mastek in Q3FY25 reported revenue of US$102.9 mn, down 0.7% QoQ /up 9.5% YoY (up 0.1% QoQ/7.6 YoY in CC terms). On a QoQ basis, growth amongst verticals was led by Healthcare, (21.6% of mix) and Manufacturing (14.1% of mix) which grew by 21% and 0.2% while Retail (13.3% of mix), Financial services (12% of mix) and Government (39% of mix) de-grew by 7.4%, 6.7% and 3.9% respectively. Geography wise, UK & Europe (56.8% of mix) grew by 1.7% while MEA (14.9% of mix) and US (28.3% of mix) declined by 6.3% and 1% QoQ. EBITDA margin of the company contracted by ~32 bps QoQ to 16% due to ~160 bps impact of the wage hikes, currency headwinds, partially offset by offshoring, pyramid optimization and reduced subcon costs. The PAT came at ₹94.7 crore, translating to a PAT margin of 11% down ~390 bps QoQ. The company’s 12M order backlog grew strongly by 11% sequentially at US$ 248.5 mn. It added 27 new clients in the quarter. The total employee base for the quarter, stood at 5,260 employees, net reduction of 245 employees. The company is decreasing its employee base as it plans to infuse AI to drive efficiency. However, it plans to increase the headcount base in the selected areas, where they have planned to grow. It has declared an interim dividend of ₹ 7 per share.
Views: Mastek reported a marginal uptick in the rupee revenues, on account of Q3 being a furlough quarter. The company’s deal pipeline for Q4 remains healthy, with a large deal of US$ 40 mn. Moreover, the management stated that the Healthcare vertical in the US has seen a strong revival, and is ambitious of taking the margins of the UK & Europe region to 20-21%. It also expects H2FY26 to deliver a steady growth in the US. Further, the management is taking active measures to reduce its tail accounts in the AMEA region (currently margin dilutive in nature) and aims to achieve a double digit margin growth in a couple of quarters.
Impact: Neutral