Mastek Ltd.|Q2FY15 Result Update | Above Expectation Performance: Strong growth in Insurance Vertical: Maintain BUY with TP of Rs.550 ::IndiaNivesh

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 Mastek Q2FY15 result was mixed-bag; revenue and EBITDA above our
estimate; PAT significantly below our expectations. USD revenue grew by
11.0% Q/Q to $41 mn (v/s INSPL est of $39 mn). The $-revenue growth was
driven by insurance (+13.0% Q/Q), IT & other Services (+28.0% Q/Q), and
other financial services (+41.0% Q/Q), partially offset by 8% Q/Q decline in
Government segments. Rupee revenue went-up 11.7% Q/Q to Rs.2,443 mn
(INSPL est Rs.2,352 mn).
 EBITDA margin expanded 580 bps Q/Q to 9.9% (v/s 4.1% in Q1FY15) on
back of lower employee, R&D, and SG&A expenditures, partially offset by
increase in other expenditures and consulting charges (as % of Revenue).
The increase consultancy charges were due to rise in the onsite
subcontracting. Other expenses went up due to higher branding and
marketing expenditure.
 The depreciation expenditure decreased 3.1% Q/Q to Rs.86 mn (v/s 89 mn
in Q1FY15). During the quater, the company reported exceptional
expenditure of Rs.88 mn (Rs.52 mn restructuring cost & Rs.36 mn loss on JV
with law society). In Q2FY15, the company’s tax expenditure stood at Rs.55
mn (v/s -Rs.6 mn of tax credit in Q1FY15).
 Net profit went up 105.9% Q/Q to Rs.18 mn (v/s INSPL est of Rs.110 mn).
Excluding, exceptional expenditure, the Adj.net profit stood at Rs.106 mn,
which is largely in-line with INSPL estimate.

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