JM Financial maintains Buy on Hexaware Technologies; lowers target price to Rs 860
JM Financial maintains a Buy call on Hexaware Technologies, revising the target price to Rs 860 from Rs 880. Despite a seasonally soft quarter, Hexaware reiterated a positive outlook for CY25, driven by deal ramps and consolidation opportunities. ...
By ETMarkets.com |
ETMarkets.com
JM Financial maintains a Buy call on Hexaware Technologies with a revised target price of Rs 860 (Rs 880 earlier). The current market price of Hexaware Technologies is Rs 710.3.
Financials
Hexaware reported a seasonally soft quarter (-0.2% cc QoQ), as anticipated (JMFe: 0.3%). It however reiterated its positive outlook for CY25, despite isolated instances of delay and ramp-down. These, concentrated in Hexaware Technologies' two Government Sponsored Entity (GSE clients, are now behind, per the management. Deal ramp has commenced in one. A large consolidation opportunity has risen in the other from 100 to 10 vendors. Besides, on-track ramp in another deal and steady build-up of consolidation deals in the pipeline underpin management's optimism. They characterised sequential growth in next three quarters as - good for Q2, accelerated for Q3 and positive for Q4. Such bottom-up granular growth construct makes the outlook non-contingent on macro. Importantly, HEXT increasing participation in mega deals, even where they are not incumbents, reflects a) sales focus on high quality logos; b) strong execution/delivery; and c) platform-led transformation/efficiency capabilities. These are medium-term positives. Near-term too, priority is growth over margin as it continues to invest in new growth areas, notably legacy modernisation. Margin guidance is stable too, at 17.1-17.4% (incl. other income).
Investment Rationale
JM Financial has lowered its CY25E cc growth assumption from 12.8% to 10.5%. However, a favourable cross-currency expectation now (vs headwind earlier) restricts USD growth cut to 130bps. The brokerage has raised EBITDA margin estimates by 20-30bps. 2-3% cut to EPS is also flowing from dilution impact. They maintain a BUY, but have lowered the target price to Rs 860 from Rs 880 earlier.
Promoter/FII Holdings
Promoters held 74.71 per cent stake in the company as of 31-Mar-2025, while FIIs owned 10.59 per cent, DIIs 9.06 per cent.
Financials
Hexaware reported a seasonally soft quarter (-0.2% cc QoQ), as anticipated (JMFe: 0.3%). It however reiterated its positive outlook for CY25, despite isolated instances of delay and ramp-down. These, concentrated in Hexaware Technologies' two Government Sponsored Entity (GSE clients, are now behind, per the management. Deal ramp has commenced in one. A large consolidation opportunity has risen in the other from 100 to 10 vendors. Besides, on-track ramp in another deal and steady build-up of consolidation deals in the pipeline underpin management's optimism. They characterised sequential growth in next three quarters as - good for Q2, accelerated for Q3 and positive for Q4. Such bottom-up granular growth construct makes the outlook non-contingent on macro. Importantly, HEXT increasing participation in mega deals, even where they are not incumbents, reflects a) sales focus on high quality logos; b) strong execution/delivery; and c) platform-led transformation/efficiency capabilities. These are medium-term positives. Near-term too, priority is growth over margin as it continues to invest in new growth areas, notably legacy modernisation. Margin guidance is stable too, at 17.1-17.4% (incl. other income).
Investment Rationale
JM Financial has lowered its CY25E cc growth assumption from 12.8% to 10.5%. However, a favourable cross-currency expectation now (vs headwind earlier) restricts USD growth cut to 130bps. The brokerage has raised EBITDA margin estimates by 20-30bps. 2-3% cut to EPS is also flowing from dilution impact. They maintain a BUY, but have lowered the target price to Rs 860 from Rs 880 earlier.
Promoter/FII Holdings
Promoters held 74.71 per cent stake in the company as of 31-Mar-2025, while FIIs owned 10.59 per cent, DIIs 9.06 per cent.
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