14.10% FPI Stake In Q3: IT Stock Okays 140% Or Rs 7/Share Interim Dividend; Buy?

Specialising in enterprise digital and cloud transformation, Mastek Ltd. is a mid-cap firm in the IT industry that provides superior engineering services to clients in 40 countries, including the UK, Europe, US, Middle East, Asia Pacific, and India. The IT service provider, which has been helping its clients achieve their digital goals for more than thirty years, released its financial results for the quarter that ended on December 31, 2023, along with a 140% interim dividend for FY24.

Mastek Dividend

"The Board of Directors have declared an interim dividend of Rs. 7 (Rupees Seven) (i.e.140%) per Equity Share of the Company for the financial Year 2023-24. The said interim dividend shall be paid within 30 days to the equity shareholders of the Company, whose names appear on the Register of Members of the Company or in the records of the Depositories as beneficial owners of the shares as on the "Record Date"," said Mastek in a regulatory filing with fixing Saturday, January 27, 2024 as the record date to ascertain the eligibility of shareholders for payment of interim dividend.

Mastek Q3 Results

The IT company recorded a net income of Rs 787.6 Cr during the quarter ended 31st December 2023 up by 18.5% YoY from Rs 664.7 Cr recorded in the same quarter of the previous financial year. Its revenue from operations stood at Rs 784.3 Cr during the quarter under review as against Rs 658.7 Cr in the corresponding quarter of the previous fiscal, representing a growth of 19.1%. The net profit of Mastek reached Rs 77.7 Cr in Q3FY24 up by 15.8% YoY from Rs 67.1 Cr in Q3FY23 and operating EBITDA stood at Rs 133.5 Cr which was 17.4% higher than Rs 113.7 Cr stood in Q3FY23.

In Q3FY24, the company brought on 27 new customers. There were 436 total active clients in Q3FY24 as opposed to 441 in Q2FY24. On December 31st, 2023, the 12-month order backlog was recorded at Rs 2,067.6 crore ($248.5 mn). This represents a growth of 21.2% in rupee terms and 16.5% in constant currency terms on a year-on-year basis, while in Q2FY24, the backlog was recorded at Rs 1,861.8 crore ($224.2 mn), displaying a growth of 11.1% in rupee terms and a boost of 8.5% in constant currency terms on a Q-o-Q basis.

The firm employed 5,518 individuals in total as of December 31, 2023, with 3,889 of them employees based offshore in India and the remaining employees at different onsite locations. There were 5,598 employees as of September 30, 2023. Attrition during the previous twelve months was 20.0% in Q3FY24 compared to 19.1% in Q2FY24. As of December 31, 2023, the total cash, cash equivalents, and fair value of mutual funds were Rs 403.7 crore, up from Rs 311.9 crore as of September 30, 2023.

Hiral Chandrana, Chief Executive Officer, Mastek, said "We are pleased to report a steady quarter with revenue growth of 17.4% Y-o-Y in dollar terms. Our deal momentum is strong across geographies and our 12 months order book backlog grew 20.5% YOY in dollar terms, despite delayed client decisions. BizAnalytica acquisition is now completely integrated into the Mastek family as our Data Cloud business amplifying our pipeline in data modernization and AI related services. We continue to drive operating model transformation and disciplined account mining as we elevate our partner position with our strategic clients."

Arun Agarwal, Chief Financial Officer, Mastek, said: "We reported revenue of Rs 784.3 crore, a growth of 2.4% on a Q-o-Q basis and 19.1% on Y-o-Y basis in INR terms, in a seasonally weak quarter for the industry. Our steadfast commitment to improving operating levers enabled us to expand operating EBITDA margin to 17.0% in Q3FY24. Our Board of Directors has proposed an interim dividend of 140% or Rs 7 per share. Our disciplined execution, strong pipeline and enhanced client engagement gives us confidence on sustained success as we approach the start of FY25."

Mastek Share Price Target

Mandar Bhojane - Equity Research Analyst at Choice Broking said, MASTEK is currently trading at Rs 2920. The stock appears to be forming a Rounding Bottom pattern, and this formation is accompanied by significant trading volume. Market expectations suggest the possibility of further upward movement, with a potential target around Rs 4000 & Rs 5000. On the downside, substantial support is observed near Rs 2650.

Furthermore, MASTEK is trading above key Exponential Moving Averages (EMAs), including the 20-day, 50-day, 100-day, and 200-day EMAs. This suggests a strong bullish momentum, indicating the potential for continued upward price action. The Relative Strength Index (RSI) stands at 74, signalling an upward trajectory and confirming an increase in buying momentum.

To manage risk effectively, it is advisable to set a stop-loss (SL) at Rs 2650 to protect the investment in case of an unexpected market reversal. A prudent strategy involves considering buying opportunities on market dips at levels of Rs 2750.

In summary, considering the technical analysis and prevailing market conditions, MASTEK appears to present a promising buying opportunity for those targeting a Rs 4000 & Rs 5000 price objective, contingent upon the implementation of prudent risk management measures.

The market expert, VLA Ambala (SEBI REGISTERED RA) said, "Mastek has recently announced its first interim cash dividend of 7 per share for the current financial year, accompanied by an impressive year-on-year return of 71%. The company's current PE ratio stands at 31.71, closely aligned with its sector's PE ratio of 32.82. Despite a 20% discount from its all-time high of 3369, Mastek is currently trading at 2926. The stock is exhibiting favorable technical indicators, with RSI values of 67 (daily), 75 (weekly), and 67 (monthly). This presents a compelling opportunity for both midterm and long-term investors."

"Anticipated targets range from 3500 to 4450, with a suggested holding period of 2 to 12 months and a weekly stop-loss set at 2310. Mastek may experience a breakout after a minor pullback, making it crucial to monitor its closing prices for an optimal buying range, particularly in the vicinity of 2840 to 2900, considering the current market price at 2920," stated VLA Ambala.

Mastek Shareholding Pattern

During Q3FY24, the company recorded promoters' shareholding of 36.48%, FIIs stake of 14.10%, DIIs stake of 6.41% and public stake of 43.01%.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.