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Monday 18 February 2013

Hold Hexaware Tech; target of Rs 94: Firstcall Research


Firstcall Research has recommended hold rating on Hexaware Technologies with a target of Rs 94, in its February 11, 2013 research report.

Firstcall Research has recommended hold rating on Hexaware Technologies  with a target of Rs 94, in its February 11, 2013 research report.

“The Hexaware Technologies is formed in 1990. Hexaware is a specialized IT and BPO service provider, ranked the fastest growing mid-sized company in India. The company leadership positions in PeopleSoft, HRIT, Airlines, and BFSI. It specialize in Business Intelligence and Analytics, Legacy Modernization and Independent Testing, and have around 6000 staff in 20 countries serving 156 clients globally. The experience in the business process outsourcing arena fully complements and strengthens its service spectrum and allows operating as an enterprise-class solution delivery company.”

“The solutions that aim to provide high value by optimizing cost of ownership of technology investments for customers. Hexaware has been mentioned as one of the fastest growing RIMS providers in the Gartner report titled “Competitive Landscape in India-Based Remote Infrastructure Management Service Providers” Hexaware is a leading global provider of IT and BPO services, focusing on delivering real business results from technology solutions and specializing in Business Intelligence, Business Analytics, Enterprise Applications, HR-IT and Legacy Modernization. With 156 active clients, Hexaware has achieved leadership position in industries such as Healthcare & Life sciences, Manufacturing, Travel, Transportation, Hospitality and Logistics, Banking, Finance, Insurance, Leasing and in Domains such as HR and Business Analytics. The companies leverage over 4,000 person years of project experience and 500 engagements globally, including successful implementation of technologies like PeopleSoft, SAP, Oracle Applications, CRM and Microsoft Dynamics to affect an increased ROI from clients’ ERP investments.”


“Hexaware is a leading global provider of IT & BPO, consulting services. Reported its financial results for the quarter ended 31st Dec, 2012. The Fourth quarter witnesses a healthy increase in overall sales and adverse impact on the profitability on account of for changes to a project plan in a large engagement for a customer. The company’s net profit declines to Rs. 661.79 million against Rs. 882.49million in the corresponding quarter ending of previous year, a decrease of 25.01% due to continued investments made by Hexaware keeping the medium term horizon in mind. Revenue for the quarter rose by 16.30 % to Rs. 5022.81 million from Rs. 4318.84 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 2.23 a share during the quarter, registering at 25.76% decline over previous year period. Profit before interest, depreciation and tax stood to Rs. 895.34 millions as against Rs. 1120.89 millions in the corresponding period of the previous year.”

“Hexaware recorded above industry revenue growth once again for the year with 18% annual revenue growth rate in $ term and the gross margin improved by 80 basis points 39.2% from 38.4% and the profit after tax grew to Rs.3276 million up 23 % YoY. At the current market price of Rs.84.20, the stock P/E ratio is at 6.59 x CY13E and 5.66 x CY14E respectively. Earning per share (EPS) of the company for the earnings for CY13E and CY14E is seen at Rs. 12.77 and Rs.14.89 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 18% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 5.00 x for CY13E and 4.34 x for CY14E. Price to Book Value of the stock is expected to be at 1.57 x and 1.23 x respectively for CY13E and CY14E. As per the revenue contribution from APAC as a Geographical region is likely to be around 8 % in the year 2013 the Company has continued to make investments steadily in both strengthening & expanding its field force presence globally top capitalize on the growth opportunities in large markets such as Australia, India and ASEAN region. In order tap the huge maker potential of the emerging technologies the company focusing on new initiatives and has been regularly investing in multiple Centers of Excellence.”

“We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘HOLD’ in this particular scrip with a target price of Rs 94 for medium to long term investment,” says Firstcall Research report.

Public holding more than 90% in Indian cos

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