Hexaware Technologies Ltd. share price target

HT Global Holding BV (Acquirer) along with HT Global Holdings Ltd (promoter) of Hexaware Technologies (Hexaware) have accepted | 475/share as the final price for delisting offer. We believe that through this offer price the acquirer and promoters along with other members of the promoter group would have minimum 91.16% shareholding through the reverse book building process, which would exceed the minimum number of equity shares required for delisting of shares. Hence, we believe this will lead to delisting of company shares (subject to regulatory approvals). All...

We believe that post last 4 quarters of decelerating growth HEXW is a strong re-rating candidate but ongoing de-listing process only will drive the stock price in near-medium term. HEXW trades at 15.1X CY21 below peers with renewed growth & margin profile. Due to strong beat on fundamentals, strong deal wins & better commentary We upgrade to Buy from Reduce. We value Hexaware on 17X CY22 earnings to arrive at a changed TP of Rs.476. HEXW's 2QCY20 revenue stood at USD 208mn, declining 0.9% cc QoQ, well above our expectations of 6.1% cc QoQ decline. Supply side issues had an...

Hexaware reported healthy Q2CY20 on the back of healthy improvement in banking (3.4% QoQ), healthcare & insurance (3.5% QoQ) and hi tech & professional (2.1% QoQ) partially offset by 27.2% QoQ decline in travel & transportation vertical. We believe this improving trend will continue in coming quarters with travel being a laggard. In addition, one of the top three clients of the company has returned to growth in Q2CY20, which will further boost revenue growth in coming quarters. This coupled with healthy growth in net new deal wins (up 60% YoY in H1CY20, highest in past three years),...

Hexaware (HEXW) reported a resilient Q2CY20 with a dollar revenue decline of just 1.4% QoQ.

Hexaware Technologies' (Hexaware) revenues declined 1.7% QoQ in dollar terms mainly led by Covid-19 (that impacted revenues by 2-3%). Revenue decline was mainly led by lower utilisation. EBIT margins declined ~160 bps mainly led by higher depreciation (Ind-AS impact) and 100-120 bps of Covid19 impact. PAT margin in the quarter was higher due to forex gains. The company had robust net new deal wins in the quarter of US$69 million....

Challenged related to Covid-19 marred Hexaware's (HEXW) Q1CY20 operating performance (revenue down 1.1% QoQ CC) and are expected to worsen in Q2, making for a gloomy near-term outlook.

Hexaware's low-double digit organic growth trajectory is sustainable supported by (1) IMS/BPM-led differentiation and wins, (2) Cross-sell opportunities from Mobiquity (3 wins in 2HCY19), (3) Strengthening partner ecosystem (Guidewire, Pega, Adobe, AWS, Backbase), and (4) Increased focus to accelerate NN wins and lower client concentration risks (vs. earlier). The risk of intermittent volatility in large accounts is lower now (T10 lowered from 57% of rev to 43% over the past 3 yrs). Expect USD rev/EPS growth at 13.5/12.0% CAGR over CY19-21E. We maintain BUY on Hexaware post its in-line revenue performance. EPS cut (~4%) on margins reset (-60bps). IMS/BPM differentiation/growth leadership, Mobiquity downstream, increased focus on NN wins and strengthening partner ecosystem to support 13.5/12% rev/EPS CAGR. Our TP of Rs 430 is based on 16x Dec-21E EPS (3-5yr avg at 16.5x).

Hexaware reported 1.8% sequential revenue growth to US$214.3 million, mainly driven by volume growth. However, it was impacted by higher than anticipated furloughs and ramp down impact in a client. The impact from client ramp down coupled with weak Q1 seasonality is expected to drive substantial growth only from Q2. Going ahead, with the bottoming out of some client specific issues, improving underlying health of business and revenues from Mobiquity acquisition, the management has guided for dollar revenue growth in the range of 15-17% for CY20 with organic growth being...

An above-expected furlough impact and challenges at a large secondary-mortgage client marred revenue performance in Q4CY19.

Hexaware's low-double digit' organic growth trajectory is sustainable supported by (1) IMS/BPM and ADM service-lines, (2) Cross-sell opportunities from Mobiquity and (3) Strengthening Guidewire, Pega and Adobe partnership. While concerns around BFS (large account) persist, improved offerings in the vertical (Backbase, AWS) will support growth. We build USD rev/EPS of 15/13% CAGR over CY18-21E factoring USD rev growth at 17.1/15.7/12.1% and EBITDA% at 15.1/15.3/15.6% for CY19/20/21E, respectively. Key risks include escalation in client specific challenges (BFS) and low NN wins. We maintain BUY on Hexaware post its better operating performance (vs. est) in 3Q. Revenue cut (~3%) factoring slower organic growth (Mobiquity to support growth) is offset by margin increase. Our TP of Rs 445, valued at 16x Sep-21E EPS.

Hexaware (HEXW) reported in-line dollar revenue growth of 11.7% QoQ and EBIT margins of 13.9% in Q3CY19.

Hexaware 3QCY19 reported 12.3% QoQ CC & company did not provide organic growth composition. We estimate organic growth to be at 4% QoQ CC which below our estimates of 6.5% QoQ CC. Mobiquity acquisition contributed 7.8% or US$14.5 mn to incremental revenues. EBIT margin came 13.9% (-76bps QoQ, -156bps YoY) Q3 margin was impacted by partial impact of wage increases (full impact in Q4) offset by lack of visa costs and INR depreciation. Management highlighted that supply side constraints in US has worsened now & now it can lead to higher wage hikes as compared to last...

24 October 2019 HEXWs 3QCY19 CC revenue grew 12.3% QoQ (in line). GPM expanded 140bp QoQ to 33.8% (170bp beat), led by superior billing rates at Mobiquity. EBIT margin of 13.9% was in line with our estimate. PBT increased 4.5% YoY to INR2,223m, while PAT was up 9.2% QoQ to INR1,512m (in-line). Higher-than-expected depreciation during the quarter was offset by a lower ETR (18% v/s estimate of 20%). In last six months of FY20, revenue/EBIT/PAT grew by 19%/10%/3% YoY respectively. Mobiquity contributed USD21m in the quarter (of which incremental revenue was ~USD18m). Strong growth was partially offset by weakness at one of the top-3 clients (growth impact of -2%). Barring this account, revenue growth would have been stronger at 13.4% QoQ (CC).

Mobiquity has front-end domain expertise with offerings around strategy and experience design, while HEXW is strong in engineering and execution. This is creating ample opportunities for both the entities to pitch full stack experience to their respective client groups. Mobiquity has strong vendor and client relationships with AWS and Backbase, which is creating opportunities for HEXW in IMS and retail banking, respectively. BFS vertical (40% of total revenues) is highly skewed toward capital markets. Macro uncertainty and lower spends by capital market firms on digital (as well as cut down on legacy IT) have led to softer growth in 1HCY19 (3.8% YoY). HEXW has been impacted by changed priorities in one of the largest clients in the vertical. That said, HEXW has identified the following trends which will drive growth in operational transformation in capital markets, [3] focus on retail banking by strengthening partnership with Backbase, [4] digitization in corporate banking space and [5] enterprise data management & data governance.

Background Hexaware is a mid-cap IT company & a leading global provider of IT solutions. In 2QCY19: Revenue share from Application Development & Maintenance is (37.0%), Enterprise Services (9.4%), Testing (17.7%), Business Intelligence & Analytics (12.3%), BPS (8.0%) and Remote Infrastructure Management services (15.6%). The total headcount stands at 18,294 and number of active clients stood at 255. The company's geographical revenue break-up is as follows; America (76.8%), Europe (14.0%) and APAC (9.2%). Company's revenue share amongst industry segment: Banking and Capital markets (39.8%), Travel & Transportation (10.1%), Healthcare &...

Despite continued BFS headwinds, Hexaware's low-double digit (organic) growth trajectory is sustainable supported by IMS/BPM (no legacy) and driven by Automation, Cloud and Digital offerings. We expect strong synergies/cross sell from Mobiquity acquisition with portfolio augmentation across BFS, Healthcare and Retail verticals backed by robust partner ecosystem (AWS, Backbase). We build USD rev/EPS of 16/15% CAGR over CY18-21E. Key risks include escalation in client specific challenges (BFS) and low NN wins. We maintain BUY on Hexaware post its lower/inline rev/margin in 2QCY19. Mobiquity acquisition and cloud/automation led wins will support growth. Estimates and TP unchanged at Rs 445, at 16x Jun-21E EPS.

Hexaware Technologies (HEXW) recorded a strong 2QCY19, with revenue up 4.7% QoQ (5% QoQ in CC terms) to US$188.5mn. Adjusted for 15 day revenue impact for Mobiquity (acquired in Jun'19), USD revenue rose 2.8% QoQ, while CC revenue rose >3% QoQ. Growth components include volume growth of 3.9% QoQ and higher billing days of 1.1% QoQ, totalling 5% CC growth, while there was an adverse currency impact of 0.3% QoQ. Owing to healthy revenue growth, lower visa cost, improved billing rate, favourable delivery-mix, higher utilisation and cost efficiencies, EBIT margin rose 87bps QoQ to 14.6% (154bps above our estimate). Aided by higher margin, other income and lower tax rate, adjusted net profit surged by 21.5% QoQ with...

Hexaware's (HEXW) operating margins outperformed at 14.6% (+90bps QoQ vs. 30bps est.), taking the Jun'19 quarter ahead of expectations.

offshore mix & better utilization helped in improvement. We believe key negative for Hexaware is softness in BFS (41% of revenue) mainly focused in capital markets & buy side for new deals which have longer sales cycles. We...