Hexaware – reality check

Hexaware: Retains guidance

Sometimes, no news is good news for companies. Even as many mid and large-cap IT players such as TCS, Mindtree and KPIT Technologies have indicated that the March quarter may remain weak on account of currency volatility, Hexaware Technologies has not given any such indication. The stock rallied 15 per cent last week, even as the market tanked. In the last three months, the stock has gone up by nearly 60 per cent.

Hexaware’s stock has been on a runaway rally after the company reported sequential revenue growth of 4.1 per cent (in dollar terms) in the December quarter, best in the industry. In the last three quarters, Hexaware delivered reasonable revenue growth. Key verticals such as banking and financial services and healthcare are witnessing strong traction, while manufacturing, travel and transport segments hold steady. Hexaware’s high-margin service offerings such as business intelligence and enterprise solutions continue to grow at a healthy rate.

While Hexaware looks set to match or may be even better the industry’s likely growth rate of 12-14 per cent (in dollar terms) in 2015, its earnings multiples have certainly gone into expensive zone, warranting a cautious approach.

The stock trades 29 times its trailing 12-month earnings, ahead ofmid-tier peers such as Mindtree, KPIT Technologies and Cyient, which trade at 15-24 times trailing earnings.