November 03, 2016 / 13:57 IST
Hexaware’s 3QCY16 results beat our estimates on EBIDTA margin which aided in PAT beat. USD revenues were in-line with our estimates. Hexaware continues to show solid traction in IMS and BPO services led by its “Shrink IT theme” which aims at using Automation to drive operational efficiencies and win new deals in these segments. We modestly trim our USD revenue growth assumptions to 8.1/13% for CY16/CY17E (vs 9/14.5% modelled earlier). We trim our EPS estimates by 2/4% for CY16/CY17E led by USD revenue downgrade and marginally increase in tax rate assumptions. Board announced a proposal for buyback of 5.69mn shares (1.9% of paid up capital) at Rs 240/sh through tender offer and intends to spend Rs 1367mn for the same. Hexaware’s performance remains commendable in comparison to peers in the sector. Our TP is Rs 240/sh (15.5x CY17E EPS). Maintain BUY.
We believe the Shrink IT theme has the potential to translate into a larger pipeline for a nimble-footed player like Hexaware. Considering a favourable exit revenue rate for CY16E, we note that Hexaware has the potential to deliver industry leading growth in CY17E. We retain BUY.
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