Hexaware (HEXW IN) - Impressive growth led by volume - CSEC Research

Impressive growth led by volume

- In 1QCY17, Hexaware reported robust revenue growth of 4.2% QoQ to USD 144.8mn in USD term. In Constant Currency revenue grew by 4% QoQ. Reported revenue grew by 2.1% QoQ to INR 9,605mn. Revenue growth was led by volume growth of 4.3% QoQ, while pricing declined by 0.3% QoQ.

- The onsite revenue grew 7.6% QoQ, while offshore revenue declined 2% QoQ. Management indicated that, going ahead, growth will be onsite-led. Company's top 20 clients grew by 5.6% QoQ, top 10 clients +3% QoQ and top 5 clients 2.6% QoQ.

- EBITDA margin declined marginally by 0.9% QoQ to INR 1.6bn with EBITDA margin at 16.9%. A decline in realizations and project ramp-up costs impacted margins in 1QCY17. PAT declined 7.4% QoQ to INR 1.1bn.

Valuation: We believe that revenue growth momentum is likely to continue in 2QCY17, largely be driven by volume growth in the underlying business. At CMP, the stock trades at 14.7x/13.3x of CY17E/18E EPS. We assign a target P/E of 14x CY17E EPS and value the stock at INR 240 and thereby maintain the MARKETPERFORMER rating on the stock. Risks: Adverse cross currency movements, a prolonged slowdown in Enterprise solutions business, deferral of deal closures.

Shares of HEXAWARE TECHNOLOGIES LTD. was last trading in BSE at Rs.237.75 as compared to the previous close of Rs. 237.95. The total number of shares traded during the day was 101694 in over 1540 trades.

The stock hit an intraday high of Rs. 241.5 and intraday low of 231. The net turnover during the day was Rs. 24278944.

Source : Equity Bulls

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