Hold Hexaware Technologies; target of Rs 415: ICICI Direct

ICICI Direct's research report on Hexaware Technologies

Hexaware Technologies (Hexaware) reported Q2CY20 numbers. US$ revenues fell 1.2% QoQ to US$208.1 million vs. other midcap IT companies, which, on average, reported 4% QoQ decline. The decline in revenues was due to supply side issues (primarily in BPS), pricing discount and offshoring. EBIT margins also increased 144 bps to 13.2%. Going forward, the company expects flat to small volume growth in Q3 and Q4 as one of the top three customers of the company (that was a headwind) has returned to growth in Q2. The company expects margins in CY20 to sustain H1 actuals +/- 30 bps (i.e. 16.2% EBITDA margins +/-30 bps). The company's DSO days declined five days to 77 days. The company has declared Rs 1.5 dividend per share.

Outlook

Hence, we maintain our HOLD rating on the stock with a revised target price of Rs 415/share (16x FY22E PE).