HDFC Securities is bullish on Hexaware Technologies has recommended buy rating on the stock with a target price of Rs 315 in its research report dated November 02, 2017.
HDFC Securities' research report on Hexaware Technologies
Hexaware posted in-line revenue, while operating performance came in stronger than estimates. Revenue came in at USD 154mn, 0.9% QoQ (USD 153mn est.), on 0.4% CC. EBITDA% came in at 17.4%, (+120bps QoQ), supported by lower ESOP cost (+41bps QoQ impact) and absence of visa cost (+65bps impact). APAT was higher at Rs 1.42bn, supported by lower ETR and higher forex gain (Combined impact of Rs 100mn sequentially on profit). Revenue guidance for CY17E was increased marginally to the ‘upper-end’ of the 14 to 15% band from 14 to 15% earlier. EBITDA% guidance was increased to 16.5 to 17.5% from ~16.4% earlier. We maintain our positive outlook on Hexaware, based on, (1) Growth leadership in IMS/BPM (automation-led), (2) Strong account mining strategy (Top 6 to 10 and Non-top-10 acs grew 9.7/5.8% QoQ), (3) Revival in enterprise solutions going ahead, supported by leadership focus and product diversification, (4) Strong net-new deal wins with TTM TCV of USD 161mn, 36% growth over the prior period (USD 41mn TCV in 3QCY17).
We expect rev/EPS growth of 13/16% over CY16-19E, factoring in rev growth at 15/9.9/13% for CY17/18/19E. EBITDA% est. stood at 16.6/17.6/18.4 for the same period. Hexaware’s valuations are supported by its growth premium and operational resilience within the sector. Maintain BUY with a TP of 315, 15x Sep-19E EPS.
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