Mastek LTD: Index Details

CMP: 439.
00 OCT 26th, 2018

MASTEK LTD ISIN:
Result Update (CONSOLIDATED BASIS): Q2 FY19 Overweight
INE759A01021
Index Details
SYNOPSIS
Stock Data Mastek Ltd is a leading IT player with global
Sector IT Software Products operations providing enterprise solutions to
BSE Code 523704 government, retail and financial services
Face Value 5.00 organizations worldwide.
52wk. High / Low (Rs.) 643.90/321.10 During Q2 FY19, consolidated net profit jumps to
Volume (2wk. Avg.) 25000 Rs. 251.00 million from Rs. 174.60 million in Q2
Market Cap (Rs. in mn.) 10404.30 FY18, an increase of 43.51%.
Annual Estimated Results(A*: Actual / E*: Estimated) Consolidated revenue for the quarter grew up
29.53% at Rs. 2570.70 million as compared to Rs.
Years (Rs. in mn) FY18A FY19E FY20E 1984.70 million in the corresponding period of
Net Sales 8172.10 10296.85 12356.22 previous year.
EBITDA 1206.50 1572.57 1843.24
During Q2 FY19 consolidated EBIDTA is Rs.
Net Profit 699.60 955.05 1130.07 400.20 million as against Rs. 293.40 million in Q2
EPS 29.52 40.30 47.68 FY18, grew by 36.40%.
P/E 14.87 10.89 9.21
During Q2 FY19, consolidated PBT stood at Rs.
Shareholding Pattern (%) 699.60 million from Rs. 324.10 million in Q2 FY18.
As on Sep 2018 As on Jun 2018 EPS of the company stood at Rs. 10.56 a share
during the quarter, as against Rs. 7.44 per share over
Promoter 46.89 47.01 previous year period.
Public 53.11 52.99 The Company added 9 new clients in Q2 FY19.

Total client count as of 30th Sep, 2018 was 162
Others -- -- (LTM).
1 Year Comparative Graph Mastek’s 12 month order backlog was Rs. 5992 mn
(£ 63.3 mn), as on 30th Sep, 2018 as compared to
Rs. 5041 mn (£ 56.0 mn) at the end of Q1FY19,
reflecting a growth of 18.9% Q-o-Q.
Mastek Ltd has approved the payment of an Interim
Dividend for the Financial Year 2018-19 @ of Rs.
3.50 per equity share (i.e. 70% of face value of Rs.
5.00 each).
Net sales & PAT of the company are expected to
grow at a CAGR of 24% and 69% over 2017 to
2020E, respectively.
MASTEK LTD S&P BSE SENSEX
PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Mastek Ltd 519.50 10404.30 35.90 12.23 1.89 120.00
Datamatics Global Services Ltd 108.80 6413.70 11.43 9.52 1.10 15.00
Saksoft Ltd 231.50 2425.00 23.91 9.68 1.57 35.00
Nucleus Software Ltd 354.00 10280.40 23.63 14.98 2.23 80.00
Document code: FOTL_261020182_2 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS)
Results updates- Q2 FY19,
(Rs. in million) Sep-18 Sep-17 % Change
Revenue 2570.70 1984.70 29.53%
Net Profit 251.00 174.90 43.51%
EPS 10.56 7.44 41.82%
EBIDTA 400.20 293.40 36.40%
The consolidated net profit jumps to Rs. 251.00 million from Rs. 174.90 million in the corresponding quarter ending of
previous year, higher by 43.51%. Revenue for the quarter increased by 29.53% at Rs. 2570.70 million as compared to Rs.
1984.70 million in the corresponding period of previous year. Reported earnings per share of the company stood at Rs.
10.56 a share during the quarter, as against Rs. 7.44 per share over previous year period. Profit before interest,
depreciation and tax is Rs. 400.20 million as against Rs. 293.40 million in the corresponding period of the previous year.
Break up of Expenditure
Value in Rs. Million
Break up of
Expenditure
%
Q2 FY19 Q2 FY18
Change
Employee Benefits
1497.00 1162.70. 29%
Expense
Depreciation &
47.90 51.00 -6%
Amortisation Expenses
Other Expenses 2329.60 1812.70 29%
Segment Revenue
For the half year ended 30th September, 2018
 Total Income was Rs 5129.40 million during the half year period as compared to Rs 3920.70 million during the
corresponding period of previous year, reflecting a growth of 30.8% on Y-o-Y basis.
 The company reported Total EBITDA of Rs 741.00 million (14.4% of total income) during the half year period under
as compared to Rs 542.00 million (13.8% of total income) during the corresponding period of previous year, growth
of 36.7% on Y-o-Y basis.
 Net profit stood at Rs 475.60 million during the half year period as compared to Rs 321.50 million during the
corresponding period of previous year, a growth of 47.9% on Y-o-Y basis.
Operating highlights
 The Company added 9 new clients in Q2FY19. Total client count as of 30 th Sep, 2018 was 162 (LTM).
 Mastek’s 12 month order backlog was Rs. 5992 mn (£ 63.3 mn), as on 30 th Sep, 2018 as compared to Rs. 5041 mn (£
56.0 mn) at the end of Q1FY19, reflecting a growth of 18.9% Q-o-Q in rupee terms and an increase of 13.0% Q-o-Q
in constant currency.
 As on 30th Sep, 2018, the company had a total of 2,104 employees, of which 1,317 employees were based offshore in
India while the rest were at various onsite locations. Employee count at the end of 30 th Jun, 2018 was 2,097.
 Mastek Ltd has approved the payment of an Interim Dividend for the Financial Year 2018-19 @ of Rs. 3.50 per
equity share (i.e. 70% of face value of Rs. 5.00 each).
 The total cash, cash equivalents and fair value of Mutual Funds stood at Rs. 1912 mn as on 30 th Sep, 2018 as
compared to Rs 2003 mn at the end of 30th Jun, 2018.
 During the quarter Mastek’s wholly owned subsidiary - Mastek (UK) Limited entered into an arrangement with its
wholly owned subsidiary-IndigoBlue Consulting Limited, U.K. (IBCL) to merge (transfer of business, assets and
liabilities) IBCL into Mastek (UK) Limited with effect from 30th June, 2018.
 Mastek UK won 2 awards at DevOps Industry under its marquee brand IndigoBlue on 17 th October, 2018 (Best
Overall DevOps Project – Public Sector and DevOps Manager of the Year).
COMPANY PROFILE
Mastek is a publicly held leading IT player with global operations providing enterprise solutions to government, retail and
financial services organizations worldwide. With its principal offshore delivery facility based at Mumbai, India, Mastek
operates In the UK and Asia Pacific regions. Incorporated In 1982, Mastek has been at the forefront of technology and has
made significant Investments in creating Intellectual property, which along with proven methodologies and processes,
increase IT value generation to its customers through onsite and offshore deliveries.
FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as of March 31, 2017 -2020E

FY17A FY18A FY19E FY20E
ASSETS
Non-Current Assets
a) Property, plant and equipment 433.10 458.90 491.02 527.85
b) Capital Work in Progress 2.20 20.80 24.13 28.95
c) Goodwill 1053.60 1080.30 1134.32 1202.37
d) Other intangible assets 311.10 249.40 264.36 285.51
e) Financial Assets
i) Investments 1688.20 1663.70 1746.89 1851.70
ii) Loans 17.60 20.10 22.11 23.88
iii) Other financial assets 28.30 0.00 0.00 0.00
f) Current tax assets (net) 208.70 83.90 100.68 114.78
g) Deferred tax assets 364.80 530.40 636.48 738.32
h) Other non -current assets 7.20 8.60 9.03 9.57
1. Sub Total Non- Current Assets 4114.80 4116.10 4429.02 4782.93
Current Assets
a) Inventories 0.00 0.00 0.00 0.00
b) Financial assets
i) Investments 1050.20 1177.00 1356.57 1505.79
ii) Trade receivables 850.90 1351.40 1635.19 1933.55
iii) Cash and bank equivalents 477.20 877.30 1070.31 1348.58
iv) Other Balances with Banks 2.50 2.90 3.31 4.13
v) Loans & Advances 1.20 4.40 5.10 5.51
vi) Other current financial assets 738.30 767.00 801.15 865.24
c) Other current assets 79.40 103.70 117.18 142.96
2. Sub Total - Current Assets 3199.70 4283.70 4988.81 5805.77
Total Assets (1+2) 7314.50 8399.80 9417.83 10588.70
EQUITY AND LIABILITIES
EQUITY
a) Equity Share Capital 116.90 118.50 118.50 118.50
b) Other equity 4573.70 5374.30 6239.56 7262.85
1. Total Equity 4690.60 5492.80 6358.06 7381.35
Non Current Liabilities
a) Financial Liabilities
i) Borrowings 652.30 496.10 421.69 371.08
ii) Other Financial Liabilities 383.80 265.30 228.16 246.41
b) Deferred Tax Liabilities (net) 265.40 186.50 160.39 142.75
c) Provisions 96.70 66.40 75.70 82.51
2. Sub Total - Non Current Liabilities 1398.20 1014.30 885.93 842.75
Current Liabilities
a) Financial Liabilities
i) Borrowings 0.20 39.10 44.57 33.43
ii) Trade payables 198.90 188.90 183.23 186.90
iii) Other financial liabilities 631.00 1092.90 1267.76 1381.86
b) Other Current Liabilities 321.40 435.90 514.36 576.09
c) Provisions 32.80 47.40 55.93 64.32
d) Current tax liabilities (net) 41.40 88.50 107.97 122.01
3. Sub Total - Current Liabilities 1225.70 1892.70 2173.84 2364.60
Total Equity and Liabilities (1+2+3) 7314.50 8399.80 9417.83 10588.70
Annual Profit & Loss Statement for the period of 2017 to 2020E
Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Description 12m 12m 12m 12m
Net Sales 5601.60 8172.10 10296.85 12356.22
Other Income 126.00 209.90 285.46 319.72
Total Income 5727.60 8382.00 10582.31 12675.93
Expenditure -5116.00 -7175.50 -9009.74 -10832.69
Operating Profit 611.60 1206.50 1572.57 1843.24
Interest -37.70 -58.60 -66.22 -72.84
Gross profit 573.90 1147.90 1506.35 1770.40
Depreciation -149.30 -187.60 -215.74 -241.63
Exceptional Items -34.00 0.00 0.00 0.00
Profit Before Tax 390.60 960.30 1290.61 1528.77
Tax -66.50 -260.70 -335.56 -398.70
Net Profit 324.10 699.60 955.05 1130.07
Equity capital 116.90 118.50 118.50 118.50
Reserves 4573.70 5374.30 6239.56 7262.85
Face value 5.00 5.00 5.00 5.00
EPS 13.86 29.52 40.30 47.68
Quarterly Profit & Loss Statement for the period of 31st March, 2018 to 31st Dec, 2018E
Value(Rs.in.mn) 31-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18E

Description 3m 3m 3m 3m
Net sales 2236.80 2440.40 2570.70 2673.53
Other income 71.20 31.30 87.00 93.96
Total Income 2308.00 2471.70 2657.70 2767.49
Expenditure -1958.40 -2131.00 -2257.50 -2340.94
Operating profit 349.60 340.70 400.20 426.55
Interest -15.60 -12.60 -24.20 -21.10
Gross profit 334.00 328.10 376.00 405.44
Depreciation -36.20 -39.30 -47.90 -49.82
Profit Before Tax 297.80 288.80 328.10 355.63
Tax -104.00 -64.20 -77.10 -84.43
Net Profit 193.80 224.60 251.00 271.20
Equity capital 118.50 118.60 118.90 118.90
Face value 5.00 5.00 5.00 5.00
EPS 8.18 9.47 10.56 11.40
Ratio Analysis
Particulars FY17A FY18A FY19E FY20E
EPS (Rs.) 13.86 29.52 40.30 47.68

EBITDA Margin (%) 10.92% 14.76% 15.27% 14.92%
PBT Margin (%) 6.97% 11.75% 12.53% 12.37%
PAT Margin (%) 5.79% 8.56% 9.28% 9.15%
P/E Ratio (x) 31.67 14.87 10.89 9.21
ROE (%) 6.91% 12.74% 15.02% 15.31%
ROCE (%) 8.65% 16.90% 19.88% 20.57%
Debt Equity Ratio 0.14 0.10 0.07 0.05
EV/EBITDA (x) 15.35 7.36 5.37 4.31
Book Value (Rs.) 200.62 231.76 268.27 311.45
P/BV 2.19 1.89 1.64 1.41
Charts
OUTLOOK AND CONCLUSION
 At the current market price of Rs. 439.00, the stock P/E ratio is at 10.89 x FY19E and 9.21 x FY20E respectively.
 Earning per share (EPS) of the company for the earnings for FY19E and FY20E is seen at Rs. 40.30 and Rs. 47.68
respectively.
 Net Sales & PAT of the company are expected to grow at a CAGR of 24% and 69% over 2017 to 2020E, respectively.
 On the basis of EV/EBITDA, the stock trades at 5.37 x for FY19E and 4.31 x for FY20E.
 Price to Book Value of the stock is expected to be at 1.61 x and 1.41 x for FY19E and FY20E respectively.
 Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.
INDUSTRY OVERVIEW
The global sourcing market in India continues to grow at a higher pace compared to the IT-BPM industry. India is the
leading sourcing destination across the world, accounting for approximately 55 per cent market share of the US$ 185-190
billion global services sourcing business in 2017-18. Indian IT & ITeS companies have set up over 1,000 global delivery
centres in about 80 countries across the world.
More importantly, the industry has led the economic transformation of the country and altered the perception of India in
the global economy. India's cost competitiveness in providing IT services, cost savings of 60–70 per cent over source
countries, continues to be the mainstay of its Unique Selling Proposition (USP) in the global sourcing market. However,
India is also gaining prominence in terms of intellectual capital with several global IT firms setting up their innovation
centres in India.
India has become the digital capabilities hub of the world with around 75 per cent of global digital talent present in the
country.
India’s IT & ITeS industry grew to US$ 167 billion in 2017-18. Exports from the industry increased to US$ 126 billion in
FY18 while domestic revenues (including hardware) advanced to US$ 41 billion.
Spending on Information Technology in India is expected to grow over 9 per cent to reach US$ 87.1 billion in 2018.*
India’s Personal Computer (PC) shipment advanced 11.4 per cent year-on-year to 9.56 million units in 2017 on the back
of rise in the quantum of large projects.
Revenue from digital segment is expected to comprise 38 per cent of the forecasted US$ 350 billion industry revenue by
2025.
Government Initiatives
Some of the major initiatives taken by the government to promote IT and ITeS sector in India are as follows:
 The government has identified Information Technology as one of 12 champion service sectors for which an action
plan is being developed. Also, the government has set up a Rs 5,000 crore (US$ 745.82 million) fund for realising
the potential of these champion service sectors.
 As a part of Union Budget 2018-19, NITI Aayog is going to set up a national level programme that will enable
efforts in AI and will help in leveraging AI technology for development works in the country.
Road Ahead
India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering
both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of
opportunities for top IT firms in India. Export revenue of the industry is expected to grow 7-9 per cent year-on-year to
US$ 135-137 billion in FY19. The industry is expected to grow to US$ 350 billion by 2025 and BPM is expected to
account for US$ 50-55 billion out of the total revenue.
Disclosure Section
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solicitation for the purchase or sale of any financial instrument including any companies scrips or this is not an official
confirmation of any transaction. The information contained herein is from publicly available secondary sources and data
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that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/
or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document.
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their knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. The
analyst qualifications, sectors covered and their exposure if any are tabulated hereunder:
Exposure/Interest to
Sectors company/sector Under
Name of the Analyst Qualifications
Covered Coverage in the Current
Report
Dr.C.V.S.L. Kameswari M.Sc, PGDCA, Pharma & No Interest/ Exposure
M.B.A, Diversified
Ph.D (Finance)
U. Janaki Rao M.B.A Capital No Interest/ Exposure
Goods
B. Anil Kumar M.B.A Auto, IT & No Interest/ Exposure
FMCG
V. Harini priya M.B.A Diversified No Interest/ Exposure
B. Srikanth M.B.A Diversified No Interest/ Exposure
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Analyst Stock Weights
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industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.
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CMP: 439.

00 OCT 26th, 2018

Public 53.11 52.99 The Company added 9 new clients in Q2 FY19.

Results updates- Q2 FY19,

(Rs. in million) Sep-18 Sep-17 % Change

Revenue 2570.70 1984.70 29.53%

Net Profit 251.00 174.90 43.51%

EPS 10.56 7.44 41.82%

EBIDTA 400.20 293.40 36.40%

Value in Rs. Million

Other Expenses 2329.60 1812.70 29%

For the half year ended 30th September, 2018

Balance Sheet as of March 31, 2017 -2020E

Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Value(Rs.in.mn) 31-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18E

Particulars FY17A FY18A FY19E FY20E

EPS (Rs.) 13.86 29.52 40.30 47.68

Important Disclosures on Subject Companies

Firstcall Research - Overall Statement

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