Hold Hexaware Technologies; target of Rs 359: Edelweiss
Edelweiss’ research report on Hexaware Technologies
Hexaware Technologies’ (Hexaware) Q1CY18 revenue at USD162.2mn (up 3.9% in USD, 3.3% in CC), surpassed Street’s 2.9% estimate. EBITDA margin fell 40bps QoQ to 15.5%, below Street’s 16.2% estimate, due to higher investment in sales & marketing (S&M). The company is eyeing market share gains and focusing on maximising revenue growth. We do not foresee margin expansion due to absence of margin levers and reinvestment of growth in ramping up S&M efforts. Considering strong start to CY18 and robust traction in its automation-led IMS & BPS services, we expect Hexaware to breach upper end of its revenue growth guidance of 10-12% and clock USD revenue CAGR of 13.4% over CY17-19E.
Despite strong revenue growth, margin is likely to remain flat resulting in PAT CAGR of 16.2% over CY17-19E. However, at CMP, we believe the stock is fairly valued. Maintain ‘HOLD’ with INR359 TP (16x CY19E EPS).
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