Despite posting a strong 26% jump in profits, brokerages are not pleased with Information Technology firm Hexaware Technologies.
Despite posting a strong 26% jump in profits, brokerages are not pleased with Information Technology firm Hexaware Technologies. The firm reported a profit of $1.75 billion, helped by significant forex gains, and posted a strong order intake at $69 million for the Januar-March quarter. However, Hexaware’s revenues declined nudged by lower utilization and EBIT margin fell 160 basis points to settle at 11.8%. What irked some of the brokerages is the firm’s decision to do away with the quarterly dividend in order to maintain some cash to tide through the coronavirus pandemic. Here’s what brokerages think about the scrip.
HOLD; Target Price: Rs 270
The brokerage firm has taken note of the order intake one side but has also highlighted that the firm’s EBIT fell to the weakest levels in December 2010. “Despite the slight beat in net profit supported by forex gains, we leave our operating estimates and earnings estimates unchanged. We also introduce CY22E EPS at Rs25.6. We retain Hold, with a revised TP of Rs280 (vs. Rs260 earlier) as we roll over to Mar’22 (vs. Dec’21 earlier), based on an unchanged target P/E multiple of 11x,” Emkay Global said in note. Hexaware has withdrawn its guidance for the calendar year 2020 owing to the significant uncertainty in the business environment. EPS estimate for CY20 remains unchanged at Rs 19.4.
HOLD; Target Price: Rs 315
The company’s weak revenues were helped by a sluggish performance by the travel & transportation and manufacturing & consumer business. These segments posted a decline of over 5%, each in the last quarter. “The company has seen robust net new deal wins in the quarter. However, we expect a delay in deal ramp-ups due to Covid-19 related impact. In addition, the company’s exposure to travel and manufacturing vertical could see pricing led to pressure impacting revenues and margins,” said ICICI Direct in a research note. Hexaware expects the second quarter to be the worst, keeping revenues under pressure.
HOLD; Target Price: Rs 285
Edelweiss does not seem impressed by Hexaware’s decision to suspend guidance. “Our key concern is on the suspension of guidance, which if issued even after a sharp cut would have instilled more confidence,” the brokerage firm said. At 14x CY20E EPS, the stock is fairly priced, according to Edelweiss Securities. If the Indian Rupee were to gain and the US enters a prolonged recession along with Europe, Hexaware could be in for some trouble.
ADD; Target Price: Rs 300
Hexaware’s strong sales hunting engines is what is keeping HDFC Securities in the loop. Other factors that impress HDFC Securities include — Lower client concentration risk, improvement in Travel & Transportation profitability despite the declining trend, and steady cash generation (73% OCF/EBITDA) supported by stable DSO .