Mastek – Add it to your watchlist

A bet on Oracle Cloud ERP and UK market?

Published: Feb 11, 2022
Promoters have been buying around ₹ 2500-2600 levels
52-week range: ₹ 1101 – ₹ 3669

Current Price: ₹ 2600 (Feb 21, 2022)

Summary:

Mastek is a global software solutions and systems integration service provider which designs, develops, integrates, and maintains business applications. Mastek acquired Evosys in Feb 2020, a trusted Oracle Partner with more than 2,000 experienced consultants and 1,200 Oracle Cloud customers. Mastek acquired TAISTech, Oracle ATG, and Oracle Commerce Cloud consulting.

Quick Facts:

  • Around 5000 employees.
  • Strong track record in the Government, Health, and Retail verticals.
  • Successful relationships with UK Government Department.
  • Inorganic expansion through Evosys.
  • Evosys is on Oracle’s SAP Replace campaign.
  • Evosys is named in Gartner for Oracle Cloud Applications Services.
  • Oracle Platinum Partner.
  • 1200+ Oracle Cloud clients.
  • Won a healthcare contract worth EUR40mn from the UK government.

Competitors:

  • Accenture, Deloitte, PWC, IBM, Infosys, Wipro, TCS.

Revenue:

  • Around 35% revenue from Oracle Cloud.
  • Revenue Mix: Top 5 (28.5%), Top 10 (44.4%).
  • Revenue Mix: UK & Europe (66.3%), US (18.5%), Middle East (9.2%).
  • Revenue Mix: Government & Education (38%), Health & Life Sciences (24%), Retail/Consumer (14.4%), Manufacturing (9.7%), Financial Services (9%).
  • 72% of its revenues from Government, Health, and Retail.

Risks:

  • Client concentration: 45% of its revenues from its top 10 clients.
  • Any top client exit may have an adverse impact on its revenues and profitability.
  • Geography concentration: 66% of its revenues from the UK & Europe.
  • Any slowdown in the UK & Europe region may have an adverse impact on its revenues and profitability.
  • Integration with Evosys could be a challenge.
  • Attrition rates are high at 24%

Negatives:

Even though Mastek was founded in 1982, a year after Infosys, Mastek could not replicate the success of Infosys. Mastek is still a small company.

10-Year Data:

Management:

  • Mr Hiral Chandrana is the Global CEO of Mastek. He has over 25+ years of global experience in IT Services. He has worked with Wipro.
  • Mr Umang Nahata heads the Global Oracle business at Mastek. He is the co-founder and CEO of Evosys.

Investors:

  • Promoters hold 37.59% of the company
  • MFs hold 2.55% of the company
  • Abakkus Fund holds 4.19% of the company
  • Mukul Agarwal holds 1.05% of the company

Mr. Ashank Desai, promoter of Mastek, has been buying Mastek in the market from 24/Jan to 11/Feb.

Valuation:

  • Historically, Mastek traded around P/E of 15x, and the current P/E is 29x.

Note: The growth rate assumption for the DCF can go wrong.

DCF

Resources:

  • Annual Reports, Investor Presentations, Gartner

Recent Developments:

Oct 2021:
Mastek appoints Hiral Chandrana as Global Chief Executive Officer.
Read more: Group CEO Announcement

Jan 11, 2022:
Mastek appoints Prajakta Talvelkar as Global Head of Marketing & Partnerships
Read more: Global Head of Marketing Appointment

Jan 28, 2022:
Mastek appoints Ritwik Batabyal as Chief Technology and Innovation Officer
Read more: CTO Appointment

Feb 07, 2022:
Mastek appointed Damien Venkatasamy, Vivek Chopra and David O’Brien as subsidiary board members.
Read more: Mastek Subsidiary Board Appointment

Disclaimer:

For educational purposes only.

Appendix:

Magic Quadrant for Oracle Cloud Application Services
Gartner peer insights
Magic Quadrant for Cloud ERP for Product-Centric Enterprises

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