Motilal Oswal initiates coverage on Hexaware Technologies with a Buy, target price Rs 950

Motilal Oswal Financial Services has initiated coverage on Hexaware Technologies with a Buy call at a target price of Rs 950. The current market price of Hexaware is Rs 801.6.
Hexaware Technologies, incorporated in 1992, is a Small Cap company with a market cap of Rs 48570 crore) operating in IT Software sector.

Hexaware Technologies' key products/revenue segments include Information Technology Products for the year ending 31-Dec-2023.


Financials
For the quarter ended 31-03-2025, the company has reported a Consolidated Total Income of Rs 3212.30 crore, up 1.08% from last quarter Total Income of Rs 3178.00 crore and up 16.42% from last year same quarter Total Income of Rs 2759.30 crore. The company has reported net profit after tax of Rs 327.10 crore in the latest quarter.

The company's top management includes Mr.Joseph McLaren Quinlan, Mr.Neeraj Bharadwaj, Ms.Sukanya Kripalu, Mr.Vivek Sharma, Mr.Milind Shripad Sarwate, Mr.Shawn Albert Devilla, Mr.Kapil Modi, Ms.Lucia De Fatima Soares, Ms.Sandra Joy Horbach, Mr.Srikrishna Ramakarthikeyan, Mr.Julius Michael Genachowski. Company has BSR & Co. LLP as its auditors. As on 31-03-2025, the company has a total of 61 crore shares outstanding.

Investment Rationale
Backed by a strong foundation of strategic partnerships, differentiated capabilities, and a well-diversified revenue mix, Hexaware Technologies is well-positioned within the mid-tier IT services space. What sets it apart is its sharp GTM strategy aimed at scalable growth, robust cash conversion, and deep client mining capabilities. However, the near-term outlook remains fluid, with discretionary tech spending still unfolding - particularly across key verticals like US Banking, Healthcare, and Hi-Tech. Hexaware's strong execution, ongoing vendor consolidation wins, and mid-tier account traction provide resilience. Motilal Oswal Financial Services estimates a CAGR of ~12.2% in USD revenue for Hexaware over CY24-26E, outperforming the Tier-1 average of 4.1% and in-line with tier-2 average of 12.6%. Additionally, its EBIT margin is set to improve steadily from 14.6% in CY25E to 15.3% in CY27E, supported by operating leverage and offshore expansion.

With an EPS CAGR of 20.8% over CY24-CY26E, higher than the Tier-I/Tier-II average of 10.0%/13.5%, HEXT is in the top quadrant of performance within the industry. Given its strong execution, diversified vertical exposure and improving margin profile, the brokerage has initiated coverage with a BUY rating. They value Hexaware Technologies at 32x Mar?27E EPS (15% discount to Coforge?s P/E multiple) with a target price of Rs 950 (19% upside).

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.