Mastek delivered a steady performance in the first quarter of FY27, with revenue at $104.8 million, up 1.8 per cent sequentially but down 3 per cent year-on-year (YoY) in constant currency terms. Operating EBITDA margin stood at 15.4 per cent, declining 70 basis points (bps) sequentially but improving 40 bps YoY.

Anand Rathi said margins were affected by West Asia-related headwinds, including bench costs and unbilled provisioning. These were partly offset by foreign exchange gains and cost efficiencies.

A key positive was the improvement in Mastek's order visibility. Its 12-month order backlog stood at around $310 million, up 13.3 per cent YoY. The brokerage highlighted a marquee $25 million, five-year Salesforce Agentforce deal in North America as one of the key wins.

The UK remains Mastek's largest market, accounting for around 67 per cent of revenue. The segment grew about 2.2 per cent sequentially, with an EBIT margin of 19.9 per cent, supported by the FCA ramp-up and resilient BFS and public-sector demand. However, the healthcare business faced an impact from the NHS transition.

North America, which contributes around 22 per cent of revenue, grew 2 per cent sequentially in constant currency (CC) terms. Anand Rathi expects the region to emerge as a growth engine once Mastek scales its quarterly revenue run rate beyond $28-30 million, compared with around $23 million currently.

The West Asia remained a weak spot. The region, which contributes about 11 per cent of revenue, saw a 7.9 per cent sequential decline in dollar terms amid continued geopolitical pressures.

AI is increasingly central to Mastek's growth strategy. The company recorded more than 40 AI-led deal wins, while its Data & AI services business, accounting for 13.4 per cent of revenue, grew 9.8 per cent sequentially. However, management expects renewal pricing pressure of around 15 per cent, potentially rising to 20-25 per cent, amid intensifying competition.

On valuations, Anand Rathi said Mastek trades at 11.6 times and 10.7 times estimated FY27 and FY28 earnings, respectively. It expects adjusted EPS to grow at around 8 per cent CAGR over FY26-28 and retained its Rs 2,377 target price.

Key risks to Mastek include weaker execution in the US and a deterioration in the UK fiscal environment, which could weigh on NHS and public-sector spending.

The brokerage expects IT-sector revenue growth to remain muted in FY27 due to AI-led deflation and geopolitical pressures. However, it believes scaled, execution-focused mid-cap IT companies could benefit from increasing vendor consolidation and cost-take-out deals.