Hexaware Technologies shares rally 4% as Nuvama initiates with buy; 23% upside seen

Hexaware Tech shares have risen 11 percent in one week.

Shares of Hexaware Technologies rose 4 percent to Rs 807 on Thursday after Nuvama Institutional Equities initiated coverage on the stock with a ‘buy’ rating and a target price of Rs 950 per share, citing strong growth prospects and an attractive valuation following the recent correction. The price target implies an upside potential of 23 percent from the last close.

The brokerage noted that Hexaware, with annual revenue of USD 1.4 billion, is well-placed within the mid-cap IT universe to outpace larger peers in the coming years.

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It expects the company to deliver an 11 percent revenue CAGR in dollar terms between CY24 and CY27, supported by its diversified vertical presence, coveted client base and robust cash flow profile. Margin expansion of about 250 basis points is also expected to drive a 19 percent CAGR in EBIT and an 18 percent CAGR in earnings per share over the same period.

Hexaware’s positioning in the USD 1–5 billion revenue zone gives it the ability to pursue larger deals while retaining growth flexibility, Nuvama said. The company has a strong presence in BFSI, manufacturing, professional services, hi-tech, travel and healthcare, and works with 31 Fortune 500 clients. Its client relationships remain sticky, with the average tenure of its top 5, 10 and 20 customers standing at 15, 15 and 12 years, respectively.

On the margins front, Hexaware has historically maintained EBITDA levels of 15–16 percent, though recent years were affected by exceptional costs. With ERP transformation and other one-off expenses set to taper off by H2CY25, Nuvama expects margins to improve gradually, reaching 17.4 percent by CY27.

According to the brokerage, the recent decline in Hexaware’s stock after soft Q2CY25 earnings has created a favourable entry point. “The CMP offers an excellent opportunity to own a high-quality business at an inexpensive valuation,” it said, adding that the stock trades at 28x and 24x its CY26 and CY27 earnings, in line with peers such as LTIMindtree and Mphasis.

At about 10 am, shares of the company were trading at Rs 795, higher by 2.8 percent from the last close on the NSE. Hexaware Tech shares have risen 11 percent in one week.

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