Bonanza

Mastek (Buy)

CMP: ₹479.9

Target: ₹585

Mastek is an IT services provider with global operations, providing solutions to government, retail and financial services organisations worldwide.

Recently, the stock price of Mastek Ltd. (Mastek) corrected by about 5 per cent from 52-week high of ₹511 despite reporting good set of numbers in the recent quarters on the acquisition of the US-based TAIS by Mastek. Recently, Mastek has acquired the US-based TAIS for $26 million for all cash deal from its internal accruals. The acquisition has opened up fresh opportunities to establish Mastek’s presence in the US IT-services market.

TAIS is an IT-services company implementing the Oracle CX package for mid-market retailers such as Tillys, Rue 21, Mason, Stamps, Petmate and Toms Shoes from centres in the US (Dallas) and India (NCR and Chennai).

Mastek has lagged peers in growth partly because of its strategy of participating in a concentrated target market (UK 92 per cent, government 43 per cent till FY17). The acquisition is likely to open new avenue for Mastek in the US market. The TAIS acquisition is likely to be completed by FY18E and will account for 32 per cent of overall revenue, leading to a over 40 per cent increase in revenue of Mastek in the coming year.

Key risks: a) Any loss of client or weak execution of the project may negatively impact future growth prospect of Mastek, b) Any TAIS-integration related challenges, if arises, may affect Mastek’s US expansion plan in the coming years; c) Any sharp rupee appreciation against major currencies.

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