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For 3QCY2011, Hexaware reported robust set of results. Major highlights of the
results were whopping growth of 9.2% qoq and considerable operating margin
expansion, despite wage hikes given to onsite employees during the quarter.
Hexaware has been outperforming in the mid-cap space since a year by growing
at a scorching 7.5% CQGR over 2QCY2010–3QCY2011. Management has been
outperforming its guidance every quarter and has guided for at least 32% yoy
revenue growth for CY2011. We expect the company to continue its revenue
growth on the back of increasing traction for enterprise services as well as
continue its operational exuberance. We recommend Neutral on the stock.
Quarterly highlights: For 3QCY2011, Hexaware reported USD revenue of
US$78.8mn, up 5.3% qoq. In INR terms, revenue came in at `366cr, up 9.6%
qoq. The company’s EBITDA and EBIT margins expanded by 345bp and 348bp
qoq, despite wage hikes given to onsite employees during the quarter, on the
back of stronger volume growth, lower SG&A expenses and INR depreciation
against USD. PAT for the quarter stood at `65cr, up 7.4% qoq.
Outlook and valuation: On the back of an improving deal pipeline, management
has guided to grow the company’s revenue in CY2011 by at least 32%
i.e., above US$306mn, which seems easily achievable considering
management’s previous track record. Thus, we expect the company’s niche focus
in enterprise solutions and business intelligence (BI) to play out strongly. Further,
we expect USD and INR revenue to grow at a scorching 24.4% and 25.2% CAGR
over CY2010-12E, respectively. Also, Hexaware has adequate levers to expand its
margins – such as strong volume growth, improvement in utilization level,
broadening of the employee pyramid and maintaining SGA at absolute
levels – which can elevate its EBITDA margin to 16.8% for CY2011 from 8.8% in
CY2010. Thus, we expect EBITDA and PAT to grow at a whopping CAGR of
72.3% and 69.4%, respectively. We value the company at PE of 11x CY2012E
EPS, which gives us a target price of `92. We recommend Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 3QCY2011, Hexaware reported robust set of results. Major highlights of the
results were whopping growth of 9.2% qoq and considerable operating margin
expansion, despite wage hikes given to onsite employees during the quarter.
Hexaware has been outperforming in the mid-cap space since a year by growing
at a scorching 7.5% CQGR over 2QCY2010–3QCY2011. Management has been
outperforming its guidance every quarter and has guided for at least 32% yoy
revenue growth for CY2011. We expect the company to continue its revenue
growth on the back of increasing traction for enterprise services as well as
continue its operational exuberance. We recommend Neutral on the stock.
Quarterly highlights: For 3QCY2011, Hexaware reported USD revenue of
US$78.8mn, up 5.3% qoq. In INR terms, revenue came in at `366cr, up 9.6%
qoq. The company’s EBITDA and EBIT margins expanded by 345bp and 348bp
qoq, despite wage hikes given to onsite employees during the quarter, on the
back of stronger volume growth, lower SG&A expenses and INR depreciation
against USD. PAT for the quarter stood at `65cr, up 7.4% qoq.
Outlook and valuation: On the back of an improving deal pipeline, management
has guided to grow the company’s revenue in CY2011 by at least 32%
i.e., above US$306mn, which seems easily achievable considering
management’s previous track record. Thus, we expect the company’s niche focus
in enterprise solutions and business intelligence (BI) to play out strongly. Further,
we expect USD and INR revenue to grow at a scorching 24.4% and 25.2% CAGR
over CY2010-12E, respectively. Also, Hexaware has adequate levers to expand its
margins – such as strong volume growth, improvement in utilization level,
broadening of the employee pyramid and maintaining SGA at absolute
levels – which can elevate its EBITDA margin to 16.8% for CY2011 from 8.8% in
CY2010. Thus, we expect EBITDA and PAT to grow at a whopping CAGR of
72.3% and 69.4%, respectively. We value the company at PE of 11x CY2012E
EPS, which gives us a target price of `92. We recommend Neutral on the stock.
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