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Cholamandalam Sec
Hexaware Tech
(Marketperformer)
CMP: ₹229.20
Target: ₹240
In 1QCY17, Hexaware Technologies reported robust revenue growth of 4.2 per cent q-o-q to $144.8 million. Constant Currency revenue grew by 4 per cent q-o-q. Reported revenue grew by 2.1 per cent q-o-q to ₹960.5 crore. Revenue growth was led by volume growth of 4.3 per cent q-o-q, while pricing declined by 0.3 per cent q-o-q.
The onsite revenue grew 7.6 per cent q-o-q, while offshore revenue declined 2 per cent q-o-q. Management indicated that, going ahead, growth will be onsite-led. Company’s top 20 clients grew by 5.6 per cent q-o-q, top 10 clients +3 per cent q-o-q and top five clients 2.6 per cent q-o-q.
EBITDA margin declined marginally by 0.9 per cent q-o-q to ₹160 crore with EBITDA margin at 16.9 per cent. A decline in realisations and project ramp-up costs impacted margins in 1QCY17. PAT declined 7.4 per cent q-o-q to ₹110 crore.
We believe that revenue growth momentum is likely to continue in 2QCY17, largely be driven by volume growth in the underlying business. We assign a target P/E of 14x CY17E EPS and value the stock at ₹240 and thereby maintain the ‘Marketperformer’ rating on the stock.
Risks: Adverse cross currency movements, a prolonged slowdown in Enterprise solutions business, deferral of deal closures.
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