SYNOPSIS: Stock gained after brokerage initiated buy rating citing strong order book, improving cash flows and AI-led growth, though margin pressures and pricing challenges may limit near-term profitability expansion.
During Thursday’s trading session, shares of an AI-first, digital engineering and cloud transformation partner are in focus on the stock exchanges, after a domestic brokerage firm Anand Rathi Share and Stock Brokers Limited initiated a “buy” call on the stock, citing strong order book growth, improving cash flows, and a stable outlook despite margin pressures.
With a market cap of Rs. 5,427 crores, shares of Mastek Limited were trading at Rs. 1,750.95 on BSE, compared to its previous closing price of Rs. 1,764.3. The stock has delivered negative returns of over 21 percent in the last one year, but has gained by nearly 27 percent in one month. Additionally, it is trading at a discount of over 37 percent from its 52-week high of Rs. 2,817.75 recorded on 21st July 2025 from its previous close.
Brokerage Target and Outlook
A report by Anand Rathi Share and Stock Brokers Limited has maintained a ‘Buy’ rating on Mastek Limited, assigning a target price of Rs. 2,240 per share, implying an upside potential of around 27 percent from its previous closing price.
Order Book Growth Signals Positive FY27 Outlook: Anand Rathi highlighted that the company’s 12-month order backlog stood at ~$300 million, reflecting a 13.6 percent YoY growth in USD terms. Management remains optimistic about achieving stronger growth in FY27 compared to FY26, despite ongoing macroeconomic uncertainties and pricing pressures driven by AI adoption. Notably, the US market recorded sequential growth in order bookings for the second consecutive quarter, indicating improving demand traction.
Focus on Cash Flows Amid Weak Top-line Performance: The brokerage noted a strong improvement in working capital efficiency, with Days Sales Outstanding (DSO) reducing to 73 days in Q4 FY26 from 84 days in Q3, driven by focused collection efforts under the new CFO. This resulted in robust operating cash flow of ~Rs. 541.7 crores in FY26, marking a 37 percent YoY increase. Additionally, cash and cash equivalents stood at Rs. 938.5 crores, reflecting a growth of around 51 percent YoY and strengthening the company’s liquidity position.
AI Adoption Reshaping Business Model: The report highlighted that Mastek added more than 27 AI-led programs during Q4 FY26, with the share of AI-related work in the order book increasing from 3 percent to 9 percent over the past two quarters. However, the average deal size remains relatively small at around $1 million. Despite this, operational efficiency improved, with revenue per employee and EBIT per employee rising by about 12 percent and 18 percent, respectively, during FY26.
At the same time, the brokerage pointed out that AI-led engagements are exerting pricing pressure, particularly on contract renewals, with discounts in the range of 10-15 percent or higher. In response, the company is shifting its business model from time-and-material (T&M) contracts to fixed-bid, outcome-based engagements, which now account for around 40 percent of overall business and approximately 55 percent in North America.
Mastek has guided for EBITDA margins in the range of 16-16.5 percent for FY27, compared to its earlier guidance of 16.5-17 percent. The brokerage noted that while AI-led efficiencies may support margins, these gains are likely to be offset by pricing pressures and reinvestments in AI capabilities.
Key Risks and Monitorables: The report outlined several key risks, including potential fiscal challenges in the UK that could Mastek’s UK government business, delays in recovery across the U.S. and AMEA regions, and the lag in conversion of order book growth into revenue. Additional risks include the potential impact of geopolitical tensions in the Middle East on AMEA operations and any delays in Oracle project-based implementations in both US & AMEA.
Outlook and Valuation: The brokerage has marginally revised its revenue and adjusted EPS estimates across FY26-FY28, with an expected adjusted EPS CAGR of around 8.9 percent over this period. At the current market price, the stock is trading at around 11.9x and 10.8x its FY27E and FY28E earnings, respectively. Based on these factors, the brokerage has reiterated its ‘Buy’ rating on the stock.
Financial Performance
For Q4 FY26, the company posted consolidated revenue from operations of Rs. 938 crores, reflecting a sequential growth of around 4 percent, compared to Rs. 906 crores in Q3 FY26. On a year-on-year basis, revenue increased by nearly 4 percent from Rs. 905 crores recorded in Q4 FY25. The steady momentum was supported by a 24.4 percent YoY growth in its 12-month order backlog, driven by continued strength in the UK and US markets, which also enhances revenue visibility going forward. For the full year FY26, revenue stood at Rs. 3,699 crores, reflecting a growth of over 7 percent YoY from Rs. 3,455 crores in FY25.
At the profitability level, net profit for the quarter came in at Rs. 106 crores, marking a marginal decline of about 2 percent QoQ from Rs. 108 crores in Q3 FY26. However, on a year-on-year basis, profit increased significantly by nearly 31 percent from Rs. 81 crores in Q4 FY25. For FY26, PAT stood at Rs. 404 crores, up by over 7 percent YoY from Rs. 376 crores reported in FY25.
Operational performance remained mixed during the quarter. EBITDA stood at Rs. 150.7 crores in Q4 FY26, reflecting a slight decline of around 1 percent QoQ from Rs. 152 crores in Q3 FY26, but nearly 9 percent YoY growth from Rs. 139 crores in Q4 FY25. EBITDA margins came in at 16.1 percent, contracting by 71 basis points sequentially from 16.8 percent, but improving by 75 basis points on a year-on-year basis from 15.3 percent.
On a full-year basis, EBITDA remained at Rs. 585.6 crores, marking a growth of around 7 percent YoY, while EBITDA margins remained largely stable, improving marginally by 2 bps to 15.8 percent.
For Q4 FY26, the company’s revenue by service line was primarily driven by Digital & Application Engineering, which contributed 50.8 percent to total revenues. Oracle Cloud & Enterprise Apps accounted for 27.2 percent, followed by Data, Automation and AI at 12.4 percent. Meanwhile, Digital Commerce & Experience contributed 9.6 percent to the overall revenue mix.
Order Book & More
The company’s 12-month order backlog stood at Rs. 2,849.2 crores ($300.4 million) as of 31st March 2026, reflecting a growth of 24.4 percent year-on-year from ~Rs. 2,291 crores in Q4 FY25. On a sequential basis, the order book grew by 7.2 percent from Rs. 2,658.5 crores in Q3 FY26, indicating sustained deal momentum and improving revenue visibility.
Mastek Limited is engaged in the business of offering business and technology services, including application development, application maintenance, business intelligence and data warehousing, testing & assurance and legacy modernisation.
The company is a global provider of enterprise AI, digital, and cloud services, with a presence in over 40 countries and a skilled workforce of close to 5,000 employees.
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