UK Government And NHS Spending Will Unlock Enduring Opportunities

Key Takeaways

• Strong positioning in digital transformation and AI, with expanding contract wins in public and non-public sectors, is driving multi-year growth and improving margins.
  
• Investments in talent, proprietary platforms, and geographic diversification are enhancing operating leverage, reducing risk, and supporting consistent revenue and earnings expansion.
  
• Heavy reliance on key UK government clients, rising talent costs, weak US performance, and limited AI differentiation pose significant risks to revenue growth and long-term margins.

Catalysts

Engages in the provision of enterprise technology solutions in India, the United Kingdom, Europe, North America, Middle East region, South-east Asia, India, Singapore, Australia, and internationally.

• The recent commitment by the UK government to significantly increase spending on public sector digital transformation, AI, and cloud adoption-supported by explicit multi-year funding for NHS technology upgrades and broader efficiency initiatives-positions Mastek as a key partner, providing strong visibility for long-term revenue growth and margin stability as large, recurring contracts ramp up.
  
• Mastek's success in winning and executing AI
• and data transformation-related deals in both the UK and US, coupled with early proof points in AI-enabled legacy modernization and testing automation, indicates growing differentiation and the ability to up-sell value-added services; as AI spend accelerates across health, BFSI, and public sector clients, this is expected to drive higher wallet share, improved revenue per client, and potential net margin expansion.
  
• The robust 12-month order backlog growth, broadening pipeline, and recent high-profile wins in non-public sector verticals (notably BFSI in the UK) indicate that Mastek's investments in sales, capabilities, and broader digital/cloud offerings are starting to yield results, setting the stage for multi-year, above-industry revenue growth as these deals convert.
  
• The focus on shifting the talent mix (through local graduate and apprenticeship programs) and ongoing investments in proprietary IP and platforms is expected to improve operating leverage and gross margins over time, reinforcing upward bias in net margins and earnings quality as scale increases.
  
• Strategic use of the Middle East and new leadership hires are enabling Mastek to incubate new offerings (e.g., Cerner/Oracle health platform integration), while establishing footholds in new geographies and verticals; this supports company-wide diversification, reduces client concentration risk, and increases visibility for sustainable revenue and EBITDA growth.

Mastek Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Mastek's revenue will grow by 11.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.1% today to 11.5% in 3 years time.
• Analysts expect earnings to reach ₹5.6 billion (and earnings per share of ₹180.57) by about July 2028, up from ₹4.0 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.2x on those 2028 earnings, up from 19.3x today. This future PE is lower than the current PE for the IN IT industry at 28.8x.
• Analysts expect the number of shares outstanding to grow by 0.26% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.76%, as per the Simply Wall St company report.

Mastek Future Earnings Per Share Growth

Risks

• Mastek's earnings growth is disproportionately concentrated in its UK government and NHS contracts, increasing client concentration risk. Any reduction, non-renewal, or price pressure from these top clients could result in significant revenue and earnings volatility and threatens long-term revenue growth.
  
• Talent costs are rising due to lateral hiring in UK/Europe and wage pressures in India's IT labor market. Mastek's ongoing investments in reskilling and graduate programs may take time to deliver margin benefits, potentially compressing net margins and slowing earnings recovery.
  
• Sustained weakness and volatility in the US geography, where the company faces major client ramp-downs, muted discretionary spends, and slow penetration despite management restructuring, could cap long-term growth prospects and earnings improvement from a key global market.
  
• Despite excitement around AI, Mastek's AI-led revenues are currently limited to small pilot projects, and the company admits to weak positioning in certain high-growth segments (cloud-native development, deep analytics). This raises the risk of insufficient differentiation and technology obsolescence, potentially constraining future revenue and margin expansion.
  
• Macroeconomic and geopolitical headwinds-including government policy changes (e.g., UK spending reviews), deglobalization, trade restrictions in EMEA/Middle East, and protectionist procurement-could create regulatory uncertainty, limit deal renewals/extensions, and lead to higher compliance costs, directly impacting revenue growth, operating margins, and long-term earnings visibility.

Valuation

• The analysts have a consensus price target of ₹3072.0 for Mastek based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹3332.0, and the most bearish reporting a price target of just ₹2570.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹49.2 billion, earnings will come to ₹5.6 billion, and it would be trading on a PE ratio of 26.2x, assuming you use a discount rate of 15.8%.
• Given the current share price of ₹2467.1, the analyst price target of ₹3072.0 is 19.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.