Hexaware Technologies (CMP Rs98, BUY) - Strong results, encouraging demand commentary - BRICS Research

Hexaware (HEXW) outperformed our expectation with 18% qoq growth in revenue and 37% growth in earning in Q4CY11. US$ revenues increased 6.7% (7.8% in constant currency) led by 4.8% volume growth, 1.3% increase in price realisation, and 1.7% increase in the onsite-offshore mix.

EBITDA margin expanded 430bps on currency tailwinds (275bps), operating leverage (70bps), and SG&A efficiency (85bps). We revise upwards our CY12 and CY13 earnings estimates by 9.7% and 10% to factor-in currency tailwind, lowering of expected tax rate, and sustainable growth momentum. We raise our target price to Rs125 and Maintain Buy.

Outlook and valuation: The stock trades at P/E of 9.3x CY12 and 8.6x CY13 on our estimates. Maintain Buy based on growth visibility from large deal wins, strong growth in top-10 clients, and operating leverage that is likely to sustain margins. Maintain target multiple of 11x CY13, but raise target to Rs125 from Rs105.

Source : Equity Bulls

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