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Hexaware Technologies Ltd.
Large deal to improve revenue
visibility
„Signs largest deal to date
Hexaware today announced a USD177mn five-year deal (including USD100mn
new business) from an existing client. This is the largest deal announced by
Hexaware to date and the third in a span of three months. Management expects
the deal to ramp up over the next four-to-six quarters and reach peak revenues by
4Q CY12. At 12x CY11E and 10x CY12E, we believe that valuations remain
attractive. We retain our Buy rating.
Deal to enhance global presence
Management highlighted that the new deal encompasses offering IT and BPO
services from 15 locations as against the US earlier and that it was won against
tough competition from global IT peers. The company expects to ramp the team
size to over 600 employees on the deal over next 4-6 quarters.
Upside risk to CY12e; scope for margin expansion
We see upside risk to our CY12 earnings estimate, given that the deal is likely to ramp
up over the next 4-6 quarters. Management highlighted that it intends to maintain
margins in the short term, despite investment in knowledge transfer, and expects
margins to expand over medium-to-long term. The deal should help improve the
offshore revenue mix (~41%) and enhance employee pyramid levels. Our estimates
factor in ~100bp margin expansion in EBIT over the next 4-6 quarters.
Likely strong 2Q
Hexaware reports next week. We forecast strong 7% QoQ growth in USD revenues,
driven by ramp from existing clients. We expect a 94bps QoQ EBIT margin decline
given the impact from salary hikes. PAT is likely to decline ~20%QoQ, driven by
lower forex gains and an increase in effective tax rates on a QoQ basis.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hexaware Technologies Ltd.
Large deal to improve revenue
visibility
„Signs largest deal to date
Hexaware today announced a USD177mn five-year deal (including USD100mn
new business) from an existing client. This is the largest deal announced by
Hexaware to date and the third in a span of three months. Management expects
the deal to ramp up over the next four-to-six quarters and reach peak revenues by
4Q CY12. At 12x CY11E and 10x CY12E, we believe that valuations remain
attractive. We retain our Buy rating.
Deal to enhance global presence
Management highlighted that the new deal encompasses offering IT and BPO
services from 15 locations as against the US earlier and that it was won against
tough competition from global IT peers. The company expects to ramp the team
size to over 600 employees on the deal over next 4-6 quarters.
Upside risk to CY12e; scope for margin expansion
We see upside risk to our CY12 earnings estimate, given that the deal is likely to ramp
up over the next 4-6 quarters. Management highlighted that it intends to maintain
margins in the short term, despite investment in knowledge transfer, and expects
margins to expand over medium-to-long term. The deal should help improve the
offshore revenue mix (~41%) and enhance employee pyramid levels. Our estimates
factor in ~100bp margin expansion in EBIT over the next 4-6 quarters.
Likely strong 2Q
Hexaware reports next week. We forecast strong 7% QoQ growth in USD revenues,
driven by ramp from existing clients. We expect a 94bps QoQ EBIT margin decline
given the impact from salary hikes. PAT is likely to decline ~20%QoQ, driven by
lower forex gains and an increase in effective tax rates on a QoQ basis.
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