Kotak says Hexaware Technologies well poised for double digit growth

By: | Published: August 4, 2017 4:19 AM

5.5% q-o-q and 17.7% y-o-y revenue growth to $152.6 million was well distributed across geos, verticals and service offerings and the large client base.

The company has raised CY2017 revenue growth guidance to industry leading 14-15%. (File Photo)

5.5% q-o-q and 17.7% y-o-y revenue growth to $152.6 million was well distributed across geos, verticals and service offerings and the large client base. The company has raised CY2017 revenue growth guidance to industry leading 14-15%. H2CY17 performance will be impacted by the loss of some revenue from a large client and the decision of another client to shift work to a captive centre. Led by differentiated strategy and strong management, Hexaware is well-poised for double-digit growth. However stock is fully valued at 15.7X CY2018E earnings. Reduce Revenues grew 5.5% q-o-q and 17.7% y-o-y to $152.6 million, 1.8% ahead our estimate. Revenue growth impressed with well-rounded distribution across verticals, geos and service offerings. BPO and IMS once again stood out with 18.6% and 8.4% sequential revenue growth.

Top-5 and top-10 clients grew at impressive 6.6% and 5.1% respectively. Volume growth was 6.4% and pricing declined by 100 bps due to rate renegotiation with a large client. EBITDA margin declined 70 bps sequentially. The sharp increase in utilisation rate to 80.8% from 78.9% helped partly absorb three headwinds— 66 bps lost due to appreciation of rupee against dollar, loss of 42 bps on incremental visa costs and pricing reset by a large client.

Net profit of Rs 1.22 billion grew 23% y-o-y and was 3.5% ahead of our estimate led by Fx gain of Rs 138 million. The company announced TCV of new deals from new clients of $40 million. Hexaware has raised CY2017 revenue growth guidance to 14-15% in dollar terms from 10-12% in c/c earlier. This strong growth is despite — insourcing of work by a large client and loss of projects from a large client that will impact annual revenue to the tune $18-20 million, 2.5- 3% of CY2018 revenues.

Ramp down from these clients will show up partly in Sept quarter and reflect fully in Dec 2017 quarter revenues. Guidance implies flat revenues to marginal growth in Sep and Dec quarters of 2017. The manag-ement indicated that despite the ramp down it will still exit Dec 2017 quarter with close to double digit yoy revenue growth.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition