Hexaware Technologies - March 2013 Results Preview - Motilal Oswal

- For 1QCY13, HEXW had guided for USD revenue in the range of USD94.7-96.5m, implying QoQ growth of 2.5-4.4%. We estimate revenue growth of 2.2% QoQ to USD94.4m. In Rupee terms, we expect revenue growth of 2% QoQ to INR5.12b.

- Client specific issues drove weak revenue in 4QCY12 and a sharp decline of 470bp QoQ in EBITDA margin to 16.9%. Company guided for a gradual pick-up in margins hereon for rest of the year. We model EBITDA margin uptick of 100bp QoQ to 17.9% in 1QCY13.

- We expect SGA to come off by 40bp QoQ to 18.8%, and gross margin expansion of 60bp QoQ to 36.7%.

- Our PAT estimate for the quarter is INR758m, a growth of 14.6% QoQ, driven primarily by an uptick in margins. Our implied PAT margin estimate is 14.8%, +210bp QoQ.

- HEXW's commentary following outlook of double digit growth in CY13 will be among the key things to watch out. Assuming a mid-point of guidance for 1Q, company requires a CQGR of 3.15% over 2Q-4QCY13 to meet its target of double digit growth.

- The stock trades at 8.4x CY13E and 7.3x CY14E earnings. Maintain Buy.

Source : Equity Bulls

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