Raise 3Q revenue guidance; retain Buy
Hexaware today raised its revenue guidance for 3Q (Sept Qrt) on back of higher
than expected project starts from existing clients and new client wins. It now
expects 3Q revenue to be at US$60mn, growth of 9.2% QoQ as against earlier
guidance of 5.6-7.5% QoQ. This follows a robust 13% QoQ revenue growth
reported in 2Q CY10. Retain as top midcap pick.
Likely to raise recruitment guidance; visibility improves
Management highlighted that it has surpassed its annual net employee addition
guidance of 1000 employees in the first eight months. Net employee additions
stood at 1100 for the eight months ending August 2010. We currently have ~1500
net additions for the full year. Post its recent US$110mn deal win, revenue
visibility remains robust.
Inaugurates new delivery centre
Hexaware also announced commencement of its new global delivery centre at
Bengaluru with initial capacity of 250 seats.
Strong traction in key strength areas
Hexaware continues to see strong traction in ERP vertical (29% revs) in particular
on PeopleSoft version 9.1 upgrade spend. We forecast earnings growth of 53%
over CY10-12, driven by 24% growth in revenues and significant improvement in
margins. At 7xCY11E and cash per share of Rs31, we believe valuations are
attractive. Retain Buy
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