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Reliance Securities
Hexaware Technologies (Buy)
CMP: ₹330.2
Target: ₹380
Hexaware’s 3QCY18 revenue grew by 1.6 per cent q-o-q (+2.1 per cent q-o-q in CC terms) to $171.1 million owing to unseasonal furloughs with a client, delays in ramp-up in 2 deals and staffing issues in the US.
From a vertical perspective, subdued revenue growth can be attributed to poor performances in Travel & Transportation (-3.9 per cent q-o-q), BFSI (+0.9 per cent) and MFG & Consumer verticals (-5.8 per cent q-o-q, all in dollar terms).
The company downgraded its CY18 revenue growth guidance to 11-12 per cent from 12-13 per cent earlier. On the other hand, EPS growth guidance was raised to >20 per cent from 13-14 per cent earlier owing to better margins. f
Owing to client-specific issues, Hexaware’s growth has been slowing down over the past few quarters. fHowever, the steep >25 per cent correction in stock price over the past three months has made the valuation more reasonable at 14.3x CY19E EPS. From valuation perspective, we are positive on the stock with a Target Price of ₹380.
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