Hexaware Technologies Ltd - Earnings Update - CSEC Research

Results above expectation

Hexaware posted a sequential revenue growth of 6.69% at US$84.07mn which is above our expectation of US$82.43mn (ahead of company guidance of US$82 – 82.5). In Rupee terms revenue sequentially grew by 18% to Rs. 4,319mn.

Top 10 clients the prominent growth engines

Growth in CY11 was largely contributed by its Top 10 clients which accounts ~52% of the total revenue grew ~41% YoY vs. company growth rate of 33.3%. We expect the top 10 clients continue to grow in CY12 and the management is confident in mining higher share from these accounts, through cross selling and up selling.

Volumes are expected to drive growth, pricing to be stable

Like-to-like pricing scenario in CY12 is expected to be stable; hence the revenue growth for next year will be largely contributed by volume growth. Hexaware plans to hire 1,500 employees on a net basis of which over 40% is through fresher.

Valuation:

We expect Hexaware to report an EPS of Rs. 10.6 and Rs. 11.4 for CY12 and CY13 respectively. At the CMP of Rs. 99.15 the stock trades at 9.3X and 8.7X to the CY12E and CY13E earnings respectively. We retain our "Outperformer" rating on the stock with a target price of Rs. 125 (a potential upside of 26%) based on 11X CY13E EPS of Rs. 11.4.

Source : Equity Bulls

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