Accumulate Hexaware Technologies, target Rs 255: Prabhudas Lilladher

Prabhudas Lilladher has an accumulate call on Hexaware Technologies Ltd. with a target price of Rs 255 based on 16x CY17 EPS. The current market price of Hexaware Technologies Ltd. is Rs 221.5. Time period given by analyst is year, when Hexaware Technologies Ltd. price can reach defined target. Hexaware reported impressive 6.6% QoQ USD revenue growth well ahead of ours and street expectations. The company has guided for a robust H2 as well with even Q4CY16 to be a good quarter unlike Q4CY15 which was soft. Q2CY16 margins were below expectations; however, management has clarified that Q2 had ~US$3.4m cost which will not recur in Q3. Hence, despite wage hike impact in Q3, margins will likely expand QoQ in Q3. The company is hopeful of maintaining margins in CY16. Overall, after a tepid revenue performance in the previous two quarters, company has come back with a strong revenue growth. Margin expansion will drive solid EBIT growth in H2CY16. HEXW’s performance is particularly heartening against a backdrop of revenue/margin miss by most mid‐cap peers.